I find it appropriate to start this essay paper by generalization. For instance, the economy word generates from the Greek term in which it means an individual who manages domestic matters. Although the origin of economy seems to be odd, it is imperative to note that economies and domestic matters have a lot in common. There are lots of decisions that a family makes regarding domestic issues. As such, a family decides the kind of duties that family members undertake and the returns that the members will achieve in return (Bailey, 2008). For instance, a family decides a person who does the cooking, laundry work, or the Television channel to watch at a given time. In summary, a family must make the decision on how to apportion its limited resources among its members while considering the abilities, desires, and efforts of every member.
Just like in the case of a family, society has decisions to make regarding the allocation of its scarce resources among its members. Society will make decisions relating to the kind of jobs the members of the society should do and the individuals who will perform the tasks. For instance, there are people will be engaged in agriculture such as growing crops and animal keeping. Other individuals will be occupied with the manufacturing of clothes while others will be involved in the field of engineering and medicine. Society will apportion people (together with building, land, and machines) to different jobs (Keohane & Olmstead, 2016). On the other hand, it will also apportion the output of services and goods that the individuals produce. A society can also make decisions concerning the people who will eat rice and those who will eat fruits. Additionally, the society can decide on who will take a bus to work and the individuals who will be driven by fuel guzzling cars to their places of work. The process of decision-making, as well as the apportioning of the limited resources in the society, can be summarized by asking the questions that encompass for whom? How? What?
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The question concerning what products as well as the services to be produced is an essential one that should be answered. Should a society produce cars or bread? Should a society construct roads or build residential houses for its members? Should a society build more hospitals or colleges? The question ‘what’ is significant because of the scarcity of resources even though the needs of the members of the society are forever unlimited. As such, there will be a problem of demand and supply. Demand and supply play a critical role in determining various markets. Demand means the quantity of service or a product that buyers will be willing as well as have the ability to purchase at a particular price. On the other hand, supply means the quantity of products or services that consumers can obtain from a market. However, quantity to be supplied in the market means the quantity of products that producers will be willing as well as have the ability to offer in the market at a specific price (Gagnier, 2000). Thus, price is an agreeable amount of money that sellers and buyers agree on concerning a particular product and it is the agreeable sum of money that the product should be bought. The ‘what’ aspect ensures that the commodity that is on demand is produced and made available to consumers at the rates that are affordable to the members of the society. Additionally, the rates should match the cost of producing the products to ensure that there are no losses incurred.
It is also imperative to note that production of goods should fit the preferences of the consumers. Therefore, the marginal cost regarding production of a particular good should be equal to the marginal benefit that consumers expect to get from the goods that are available in the market (Loader,2002). By so doing, the market will find it easier to allocate resources and distribute output in the society. It is imperative to note that the cost of producing additional units of products should not surpass the benefit that the members of the society will derive from the products. When a particular commodity is produced more than it is needed in the society, then its demand will decline and thus more production of the goods in question will be a waste. As such, production should just ensure that it brings the maximum satisfaction to the community members. The ‘how’ aspect will ensure that the manner in which goods and services are produced are cost effective. By so doing, producers will ensure that their methods of production are not costly, and thus, the final products will sell at reasonable prices that consumers can afford. As such, markets will succeed in the allocation of resources to the people and ensure that there is distribution of output in the society.
The components of a system of an economy such as decision making, individuals engaged in the decision-making process, the decision making and its level of decision making, and output distribution can be used in solving the ‘whom’ aspect. It is vital to know who the consumers of the products being produced will be (Morley, 2014). The producing agency should be concerned with the individual who will enjoy the services and the goods that are on offer and the manner in which the final product should reach the consumers. By having that in mind, it will be easier for markets to produce goods and services and allocate them to consumers.
References
Bailey, R. E. (2008). The economics of financial markets . Cambridge [u.a.: Cambridge Univ. Press.
Gagnier, R. (2000). The insatiability of human wants: Economics and aesthetics in market society . Chicago: University of Chicago Press.
Loader, D. (2002). Understanding the markets . Oxford [u.a.: Butterworth-Heinemann.
Keohane, N. O., & Olmstead, S. M. (2016). Markets and the environment .
Morley, M. (2014). Understanding markets and strategy: How to exploit markets for sustainable business growth .
