What is the Economy Term Paper

Tags: economics politics money stock market central bank microeconomics bank inflation government china food rational choice theory learning life economy trade debt history tax real estate

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Important Insights Gained during Principles of Microeconomics

The principles of microeconomics deal with how houses, organizations and governments spend their money—and how their decisions and transactions impact the overall market economy. One of the principal assumptions of microeconomics is that people are rational and make rational decisions by weighing the pros and cons, costs and benefits of their financial decisions. This is straight out of rational choice theory (Frank, 2008), which states that people make decisions in their economic lives by comparing the costs with the perceived benefits. This is why consumers and organizations tend to respond favorably to economic incentives. The incentive to make a purchase or an investment decision appears like a greater benefit than the cost of doing so: they recognize that they are getting something positive in return for their transaction. Incentives help, whether it is a tax credit from the government for consumers who purchase an electronic vehicle (EV)—which is something that certainly helped Tesla sell thousands of Model 3s over the past year (Capparella, 2018)—or a higher ROI given by a bank looking for consumers willing to open a CD. This paper will reflect on the three most valuable and important insights I obtained during ENCU 202 and discuss the importance of the insights to me as a manager and consumer. It will also look at the implications of my learning and how my behavior and thinking has changed to integrate my learning. Finally, it will look at specific actions I plan to take to apply insights to enhance my professional and personal effectiveness.

The first most valuable insight I gained into microeconomics during ENCU 202 was the idea that people face tradeoffs and that trade has the potential to make everyone better off. This idea was really insightful to me especially now as we found our nation in a so-called trade war with China. This is something that undoubtedly is going to impact a lot of people in a lot of different ways. The idea of this principle is that there is always going to be a tradeoff no matter what helps me to understand the current economic climate and how politics can be used to color and shape it and even to distort the economic reality. The current trade war has been said to be important because China is taking advantage of the U.S., which has a large trade deficit. But there is a tradeoff here is many things that people buy at Walmart or Amazon are made in China, while a lot of other things, like homes or cars or appliances or food are not. So this idea that everything we buy is made in China and that China is taking advantage of the U.S. consumer is not the whole story. If we were to put high tariffs on goods coming from China, it might raise the prices of some items, but there would be a tradeoff to the tariff that would have to be considered. Since trade can make everyone better off, what has to be considered is what is being traded for what. Here, we essentially trade our labor for goods or services—so our time is valued at x amount of dollars (our wages), which are then traded for a good or service. If the good or service is priced higher because of tariffs, we are likely to look elsewhere for that same or a similar good or service.

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This is how all things are ultimately connected and how the big macro events at the global level can impact decision making at the micro level. As a consumer, I need to be mindful the tradeoff of my interactions—I may pay a lot for a quality item, or a little for a less quality item and need to replace it sooner. My time is money, basically, so I need to assess whether I want to work now and save or spend now and work later. As a manager, these same questions have to be answered because you are basically making these considerations for an organization and not just for yourself.

The second most valuable insight I gained into microeconomics was the idea that…

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…does today. That shows the note has lost value. So here I am trading my time and labor over for notes that are depreciating more quickly than the care I drive. What should I do in such a situation? I need to find a better store of value for my time and labor because I do not want to put it all in Federal Reserve notes. So another action I will take to apply these insights to enhance my personal effectiveness is to look around at what assets have retained their value over time throughout history. Gold looks pretty attractive to me. However, it looks like there was a gold bubble that burst a few years back seeing how gold sold at $1800 an ounce and today it is around $1300. Buyer beware in all cases, no matter what it is and do not get caught up in panic buying. That is a great lesson I want to apply.

In terms of enhancing my professional effectiveness, these lessons can be applied by simply taking my time about making choices for my organization and not getting caught flat-footed when it comes time to make a decision about how to invest the funds I am in charge of at work. It pays to be mindful of what is going on in politics and in the market, as both of these impact the economic choices that we make and that organizations make year over year. Whether a company will invest in this technology or in stock buybacks, whether a company will invest in research and development or in paying out dividends—these things matter and they matter to a manager working for an organization because he is going to be representing that company’s interests as a stakeholder. I can see myself implementing these lessons as a manager, therefore, by communicating these ideas to others, getting feedback from other stakeholders and expanding on my understand as it applies to my role in my professional life. I can do this by having regular meetings, regular contacts with others, and regular action plans for my….....

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References

Capparella, J. (2018). Tesla Buyers to Lose $7500 Tax Credit at End of the Year [Update]. Retrieved from https://www.caranddriver.com/news/a23743195/tesla-tax-credit-deadline-date/

Frank, R. H. (2008). Microeconomics and behavior. Boston: McGraw-Hill Irwin.

Haitsma, R., Unalmis, D., & de Haan, J. (2016). The impact of the ECB's conventional and unconventional monetary policies on stock markets. Journal of Macroeconomics, 48, 101-116.

Heller, R. (2017). Monetary mischief and the debt trap. Cato Journal, 37(2), 247-261.

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