An economic concept that was shown in the self-interest reading was self-interest. Self-interest is when you make a decision that benefits you and others as well. According to Adam Smith, self-interest guides the producers to produce something that people wanted the most because this way they will make the most profit. If producers produce something that not a lot of people want, they will not make a lot of money. Also, if producers and sellers make decisions that satisfy the demand of the consumers, this would be the most beneficial to the consumers. This concept can be linked to the inn activity. The reason for this is that most of the decisions we as producers made were made to benefit ourselves. We kept a reasonable price so that we would be able to benefit ourselves the most and make the most profit. If we kept the price to low or high, we would either made no profit and a very low one and that would not have been very beneficial to us.
Another economic concept that was shown in the self- interest reading was modified market economy. This means that most decisions are made by buyers and sellers interacting in markets, although the government makes some decisions as well. This can be seen the sugar activity. In this activity, one of the news events states, “The U.S. government reduces the amount of sugar that U.S. companies may import. As a result, U.S. sugar consumers, such as candy companies, buy more sugar from U.S. sugar producers. In this example, one can see that the government made the economic decision. The government decided to reduce the amount of sugar that can be imported by U.S. sugar companies, so that more people will buy the sugar from local markets instead of foreign ones. This way the local markets in the country can make more money than the foreign ones.
One economic concept that was shown in the “Determining Prices” reading was market equilibrium. A market equilibrium occurs when the quantity supplied and quantity demanded for a product id the same at a particular price. This means that the consumers and producers are both satisfied because the demand and supply are both balanced. To reach the equilibrium, a certain amount of trial and error is needed. The producers need to keep changing their prices and play around with them to see which price the quantity demanded is the same at. This can be linked to the inn activity. This is because, for some groups, the quantity they supplied for the menus and the quantity that was demanded of the menus was the same. This meant that there was no shortage or surplus because the same amount of menus were demanded and supplied. This can also be linked to the sugar activity. After we received our news events, we were required to make supply and demand curves for this activity and then once again make them for the change that occurs in the event and find where the new equilibrium was. The equilibrium point shifted because either our demand curve or supply curve shifted, in our case the demand curve. This point, the equilibrium, showed us where the quantity demanded and the quantity supplied was the same for the news event.
Another economic concept that was shown in this reading was a shortage. A shortage exists when the quantity demanded is greater than the quantity supplied at the price that is offered. When this happens, it tells producers that they are charging too little for their products. They should raise the price so that the quantity demanded decreases, which in turn will steer them towards the equilibrium. This can be related to the inn activity that we did. In the inn activity, my group and I first charged 13 pence for Menu D. We supplied only one of this menu when a lot more demanded. This means we had a shortage because there was more quantity demand for the Menu than the quantity supplied. This told us to raise the price and we did, because we thought that this would decrease the demand and the quantity demanded and the quantity supplied would turn out to be the same and lead us to our equilibrium. o
The last economic concept that was shown in this reading was a surplus. A surplus is the opposite of a shortage. It occurs when the quantity supplied is greater than the quantity demanded at the price offered. This tells producers that the price for the product is too high and they should decrease the price to a price that is not to high or low but one that will still guarantees them a profit. This will increase the quantity demanded and steer them towards the equilibrium. This was also shown in the inn activity. Some groups decided to make a lot of the menus but when the votes came in, not many people demanded their menu. This led them have a surplus because not all of their menus were demanded so there were leftovers. The next time, the group lowered the price because they thought that there would be more demand and the shortage would be eliminated.
I chose the concepts self- interest and modified market economy from the self- interest reading because these two concepts were clearly shown in the article. They were explained in detail and so I felt that they were probably the most important concepts from that reading. I chose the concepts market equilibrium, surplus, and shortage from the determining prices reading because these three concepts were pretty much the only ones that were talked about. Also, at the top of the first page, it had these three concepts under economic dictionary so I felt that these were probably the most important if the reading put them there. Also every one of these concepts had a whole section explaining what it was which proved that they must be important.