Analysis Questions of Microeconomics - Article Example

Analysis Questions of Microeconomics Microeconomics focuses on how the household and firms maximize the use of scarce resources. This branch of economics includes discussion on the supply theory, demand theory, trade off, and rent. Other related topics include scarcity, rents, profits, and the financial environment of business, and the firm’s cost and output determination. The study of microeconomics improves the decision making process. Article 1 Production Output and Financial Environment of Business Microeconomics dictates that companies are force to charge their goods and services a price that will be able to recuperate the costs and expenses of producing the products and services.

In addition, the company sells its products and services at a price that will also generate profits. According to the New York Times article U.S. Economy Grew at 2% Rate in Third Quarter, the financial environment of business shows that tens of thousands are unemployed for close to two years due to retrenchment1. The economy is characterized as having a high unemployment rate and foreclosures in the Midwest and West regions of the United States. The unemployment rate reduces the jobless people’s purchasing power.

The business establishments will have to close down due to bankruptcy. This will precipitate to a slowdown in the local economy. The business establishments cannot hire workers to produce the goods and service due to the decline in the demand for their products and services. The total cost of production includes all costs incurred to produce the goods (Miller ). The costs are divided into fixed costs and variable costs. As the production of goods increases, the fixed cost total remains the same.

On a per quantity basis, the fixed cost per unit is reduced because the total fixed cost remains the same but the number of units produced increases. On the other hand, a reduction in the quantity produced increases in terms of fixed costs per unit. Article 2 Supply and Profits theory In the New York Times news article G.M. ‘Officially’ Introduces 2011 Chevrolet Volt Amid Controversy, General Motors has come up with its latest car model. The 2011 model is electrically powered. The company showcases the new model in many car shows and other display centers.

The news focuses on the microeconomic theory of supply and demand, demand for the G.M. Cars. Microeconomics focuses on the individual parts of the economy (Miller ). The parts include the household, the firm, demand, supply, and prices of goods and services. The theory of supply and demand assumes that the buyers and sellers are free to offer and bid for the prices of goods and services. Under the demand theory of microeconomics (Miller ), the buyer would increase one’s demand for the products if the prices are reduced.

On the other hand, the buyer will decrease one’s demand for the products if the prices are rising. General Motors is selling the new brand to drum up enough customer support to buy its latest car mode. The company can reduce its variable cost by removing part time workers. The supply theory of microeconomics dictates that the suppliers will produce more goods if the prices of products and service will increase. On the other hand, the decrease in the prices of goods will force the supplier to reduce the production of the goods.

This occurs when the prices are not high enough to recuperate the sellers’ daily expenses and generate profits (Miller ). General motors will produce enough units because it likes the current selling price2. Article 3 Scarcity The New York Article Putting a Different Kind of Urban Decline to Use states that a $30,000,000 contraption has been constructed in Michigan. The contraption is a big slide that entices thousands of people to descent into the low –lying center of Grand Rapids, Michigan to try to forget the pressures of the daily grind of office and city life.

The promoters are building the world’s longest inflatable water slide. The slide is about 500 feet long stretches three block through Lyon Street Hill. The slide will carry the participants or clients to a height of 100 feet. The slide is a two -day affair. The story focuses on the microeconomic theory of scarcity3. The people will surely patronage this unique offer. The microeconomic situation of scarcity (Miller )occurs in some environments. The scarcity of a good will cause an increase in the selling prices.

On the other hand, an abundance of a previously scarce resource will cause a reduction in the products selling price. Scarcity may occur because there are not enough resources or products found or manufactured to supply the high demand for the product. The slide is the only one in Michigan State indicating a monopoly. Some companies may choose to abandon production of a product that has a low selling price due to its abundance in the market to venture into the production of another product that has a higher selling price because of its scarcity.

This is what the slide’s owner, Rob Bliss, a 21-year-old maestro of social media Scarcity may come in different terms. Article 4 Trade off and Demand Theory The article Lionsgate Says MGM Deal Saves it $100 Million a Year states that Lionsgate will purchase Metro Goldwyn Mayer movie studios. The demand (Miller ) for the purchase would save $100 million a year in overhead expenses and increase cash flows by more than $120 million distributed over five years. The variable and fixed cost savings will be generated by the laying off of 174 employees.

This is in line with the Lionsgate Company’s reduction of its employees by 17 percent. MGM, the producer of many popular films like James Bond, had failed to pay its interest payments to its creditors. MGM begged off from paying its maturing $4 billion debt since October due to the large decline in the movie ticket sales brought by the continuing unemployment rate and closure of many business establishments4. The decline in movie ticket sales is due to the microeconomic theory of trade off (Miller ).

The fans have more time to go to the movies because they are unemployed. However, the unemployed are not in the mood to spend money to visit the movies because they are often penniless. In microeconomic parlance, the person has to make a wise trade off. The worker is caught between working and leisure. An increase in the work schedule will reduce leisure time. An increase in the leisure time will reduce work hours. An increase in work hours will increase the worker’s purchasing power quantified in terms of money.

Here, the unemployed person has more time for leisure since one has no work to report to. BRIEFLY, microeconomics centers on the household’s and firm’s maximization of scarce resources. The first article focuses on production output and financial environment of business. The second article expounds on the supply theory and profits theory. Article three discusses scarcity. The last article focuses on the theories of trade off and demand theory. Indeed, the study of microeconomics improves the decision making process.

Cited Works Miller, R., Economics Today The Micro View 15th edition U.S. Economy Grew at 2% Rate in Third Quarter, retrieved November 1, 2010 http://www.nytimes.com/2010/10/30/business/economy/30econ.html?_r=1&scp=1&sq=product%20demand%20news&st=cse G.M. ‘Officially’ Introduces 2011 Chevrolet Volt Amid Controversy, retrieved November 1, 2010 http://wheels.blogs.nytimes.com/2010/10/11/g-m-officially-introduces-2011-chevrolet-volt-amid-controversy/?scp=6&sq=general%20motors&st=cse Putting a Different Kind of Urban Decline to Use, retrieved November 1, 2010 http://www.nytimes.com/2010/08/22/us/22rapids.html?ref=michigan Lionsgate Says MGM Deal Saves it $100 Million a Year, retrieved November 1, 2010 http://dealbook.blogs.nytimes.

com/2010/10/26/lionsgate-says-mgm-merger-would-save-100-million/?scp=4&sq=cash%20flow&st=cse