Economics Essay Example for Free

Economics Essay The three areas of economics affect an individual both positively and negatively. First, in making decisions, a person often has to decide on tradeoffs because he/she just cannot afford to buy everything that he/she needs. In other words, sacrifices must be made. Economics, after all, is about allocating the resources available to a person which happens to be scarce most of the time. This would mean, for instance, that if one has set aside $10 dollars for chocolates and he/she wants to buy some oranges, the decision would often entail buying less chocolates to enable him/her to buy some oranges. This effect is often interpreted as a negative one because a person has to let go of one want in order to satisfy another desire. This illustration clearly shows that budget constraint plays a major role in decision-making. (Mankiw, 2004) The second area of economics, interaction with others, affects members of society positively because in a free market economy, prices could not just be dictated by producers and sellers without the involvement or say of the consumers. In other words, if the price of a certain commodity proves too expensive, consumers would usually look for cheaper alternatives, thereby causing the demand for the more expensive version to fall. If the 21† colored television set produced by Sony Corporation, for instance, has been priced much higher than the 21† colored television of Philips, chances are that consumers would opt for the television set being sold by Philips because of the lower price. In this case, preference for Sony, which might prove to have a higher quality, could only be expressed by those who have the money, therefore feeling no budgetary constraints. Finally, the workings of the economy could affect an individual both positively and negatively. One instant is when government decides to print and circulate an abnormally high volume of money. This situation forces money to depreciate in value, thereby resulting to inflation. A high level of inflation causes prices to increase because of the additional costs being shouldered by manufacturers owing to the lower value of money. An upside of this situation, however, could be a temporary increase in employment. Because of the availability of money, employers can afford to hire additional workers. (Mankiw, 2004)