Microeconomic Concepts and Economic Tools

Document Type:Article

Subject Area:Economics

Document 1

As a theory of individual decision making, human life has a feature that every individual takes several decisions daily. Decisions made by individuals have common features that is, the decision maker has to choose wisely between alternatives and the reason for choosing is because realization of an alternative requires the use of resources. Provided the resources are used up, they cannot be used in accomplishing other alternatives like in the case of Vancouver, the youths are faced with the task of deciding whether to pay high rents or just avoid it for residing in other places (Caputo & Paris, 2013). The resources can be of different types and decisions and the fact that picking a decision for a given alternative consumes resources would be meaningless if there were adequate resources.

Sign up to view the full document!

But due to the scarcity of resources, it makes it necessary to consider decision making, that is achieving one alternative comes at the cost of foregoing the other alternative. As a theory of public regulation, microeconomics adopts the ideology of social optimality to examine the possible outcomes if the society puts into use a given allocation mechanism. Considering a market mechanism, if it leads to equilibrium then it would be a concerning case supporting the allocations mechanisms thereby supporting leaving things in their current conditions  (Hammock & Mixon, 2013). in contrast, if the equilibrium resulting do not meet social optimality, then it should be intervened as to whether it is important to intervene the social welfare by the government. In the case of Vancouver, investments in the real estate should be socially optimal to the society and in compliance with the regulations.

Sign up to view the full document!

For instance, when the politicians or the government imposes a tax to raise revenue, there should be a positive response by all the household through compliance for the benefit of the society. That is, exogenous variables influences endogenous variable. Function is another tool that explains the relationship existing between economic variables. It, therefore, indicates how the values of independent variables affect the values of dependent variables. Considering the relationship between demand for goods and price it is expressed using a function as D=f(P), where p is price, D is demand and f is function relationship  (Liang, 2013). A function may be implicit or explicit. Graphs and diagrams are also important economic tools that represent the relationship between two or more sets of variables or data.

Sign up to view the full document!

Graphs mostly depicts a functional relationship between economic variables thus provides better understanding of the economic generalization as well as accuracy and precision. Most commonly a graph has horizontal line called x and vertical line called y and point of intersection named as the origin of economic variables  (Liang, 2013). the surfaces are divided into four parts called quadrants and are numbered in anticlockwise direction. In economic analysis, the first quadrant depicts positive values of x and y that are mostly used for economic theories. In the year 2000, a more comprehensive definition of social sustainability with special focus on urban environment was provided. It emphasized the economic development and civil society, cultural diversity, and social integration as basics of social sustainability. It also highlighted the tensions and trade-off between development and social disintegration intrinsic to the approaches of social development (Liang, 2013).

Sign up to view the full document!

From $10 to earn access

Only on Studyloop

Original template