Because of the changes in the volatile market, it is essential for all the personnel in the planning committee to be versed and well updated with the current economic principles and data of the organization. Therefore, this report is designed to equip the planning committee with economic principles, which is a research on how the society utilizes the scarce resources. In this case, macroeconomics refers to the study of the economic phenomenon including unemployment, inflation, and growth of the economy. The principles of economics are based on the analysis on how people make decisions, how the economy works, and how people interact within the economy in relation to goods and serves (Berch, 2017).
First, the report will explain how economists can be both policy makers and scientists. In this case, when an economist is asked to explain the current economic events, at that particular point, they are just economists. However, there are times when they are requested to explain the economic events like recommending certain policies, which will improve the economic outcome; this is when they are referred to as scientists. On the other hand, when an economist works towards the improvement of the economic outcomes, they are referred to as policymakers. Economists spend much of their time working as scientists as they actively collect and analyze data with an effort to validate their theories, this is imperative as it defines the identity of economists.
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The second topic will focus on the principles the society uses in the allocation of the scarce resource. One of the main economic problems is the issue of scarcity where human wants are unlimited in relation to the limited resources. In addition, scarcity relates to the societies’ inadequate productive resources to meet the human needs and wants. Therefore, scarcity will force individuals to make economic decisions in order to manage the available resources in order to meet their endless needs. Some of the scarce resources are forests, food, and water. Natural gas and oil are also encroaching into the list of scarce resources.
Third, the report will look into the circular flow model in order to determine the flow of goods and money in the economy. The circular flow model indicates how the dollar flows among firms and households. For instance, when individuals spend money or services and goods, firms will receive the money through sales, which they pay for the costs of production like salaries and wages to the workers. After the firm makes the payout and money left, it is considered as profits to the company, who are also part of the household.
The next discussion is on how the economy will coordinate ‘independent economic actors’ within the society. First, we will identify the main actors in the society; they include sellers (firms), buyers (households), and lastly the government. These independent actors are tasked with eh allocation of scarce resources like energy, land, and people. Further, these actors are responsible for the provision of beneficial services and goods within the economy.
A country’s Gross Domestic Product (GDP refers to the market value of goods and services in an economy within a specified time. Having this in mind, the economist will use this analysis to estimate on how the scarce resources are consumed. Gross Domestic Product is labeled as Y and it is divided into four distinctive compounds: Investment (I), Consumption ©, Net Exports (NX), and Government Purchases (G), which is illustrated as Y= I + C + NX + G. (Rate & Index, 2017)
Finally, the report will detail an analysis on the Consumer Price Index abbreviated as (CPI) and why it is not ideal in the calculation of the cost of living. CPI is the measure of the average change of price goods and services paid by households in a given time frame, this can be determined by the following equation
CPI (Current) = Base year price ( x) x Current price of item
CPI has been one of the efficient ways in the estimation of relative price level and cost of living. In addition, it is used in the calculation of the value of salaries, wages, and pensions at the same time regulating prices. However, there are issues, which disqualify the Consumer price Index as a tool in the estimation of the cost of living. The issues include substitution bias, which involves changes in quality and the introduction of items, this is the issues that disqualify it as an ideal method for the estimation of the cost of living (Rycroft, 2017).
In conclusion, the report has indicated the importance of familiarizing oneself with the economic principles and thoughts and the macroeconomic data, this is imperative to the success of any business in the current economic situation. In this case, the unpredictability of the economy exposes companies to risks. Therefore, continual reevaluation of the economy with an attempt to stabilize the CPI and GDP is vital.
References
Berch, B. E. (2017). Economic Literacy: An Introduction. (203); 1- 150
Rate, U., & Index, C. P. (2017). Gross Domestic Product. Balance , 1 (504.2), 1-9.
Rycroft, R. S. (2017). See also: Consumer Price Index; Inflation; Unemployment. The American Middle Class: An Economic Encyclopedia of Progress and Poverty [2 volumes] , 194.
