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An Explanation Of Market Forces

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Introduction

An Explanation Of Market Forces There have been a number of phrases, which define the term "economics", the most modern and widely used of which is as follows; "the science which studied human behaviour as a relationship between ends and scarce means which have alternative uses". Quoted by L. Robbins during the 1930's, it takes the bias of the neo-classical approach as opposed to one of a more typically classical economist. (A.G. Anderton, 1992: 289). The subject of economics is too large to comprehend sometimes. I intend to merely skim the surface on various topics within the field of economics. Talking About Fundamental Economic Problems Just as in politics, the term "economic" tends to be used in a variety of ways and contexts in order to describe certain aspects of human behaviour, ranging from activities such as producing, distributing and consuming, to the idea of frugality in the use of a resource. Modern definitions stress how such behaviour, and the institutions in which it takes place (e.g. households, firms, governments, banks), are concerned with the satisfaction of human needs and wants through the transformation of resources into goods and services which are consumed by society. These processes are said to take place under conditions of "economic scarcity". (Worthington & Britton, 2000: 82). The economist's idea of "scarcity" centres around the relationship between a society's needs and wants and the resources available to satisfy them. ...read more.

Middle

Each factor of production receives a payment or return: land receives rent, labour receives wages, capital receives interest and entrepreneurship receives profit. (A.G. Anderton, 1992: 274). Free Markets And How They Operate The free-market (or capitalist) economy stands in direct contrast to the centrally planned system. Whereas in the latter the state controls most economic decisions, in the former the key economic agencies are private individuals (sometimes called households) and firms, and these interact in free markets, through system of prices, to determine the allocation of resources. The key features of this type of economic system are as follows: * Resources are in private ownership and the individuals owning them are free to use them as they wish. * Firms, also in private ownership, are equally able to make decisions on production, free from state interference. * No blueprint (or master plan) exists to direct production and consumption. * Decisions on resource allocation are the result of a decentralised system, of markets and prices, in which the decisions of millions of consumers and hundreds of thousands of firms are automatically co-ordinated. * The consumer is sovereign, i.e. dictates the pattern of supply and hence the pattern of resources allocation. In short, the three problems of what to produce, how to produce and how to distribute are solved by market forces. ...read more.

Conclusion

Its is inevitably becoming increasingly difficult to accurately determine this, increasing potential loses, but the potential for profit is also greater. For all intense purposes, business has grown to become a skill; teams put their heads together and come up with business plans that they hope to overcome their competition with. However they must also consider potential interference from outside influences, e.g. governments, price shift within the market, price shift outside of the market, i.e. suppliers prices shift, etc. The list as well as the subject is huge, however I must draw this report to a close by stating that, economics is a tricky business, every business requires at least one individual who has extensive knowledge of its influences. Reference List * Worthington & Britton, (2000), The Business Environment Third Edition, Harlow: Pearson Education Limited. * A.G. Anderton, (1992), Economics: A New Approach, London: Collins Educational. Appendices 1.1 All other goods C B A O D E F Armaments 1.2 All other factors B A O C D Capital 1.3 Number 2 1 0-10 10-20 20-30 30-40 40-50 50-60 60-70 70-80 80-90 90-100 Income earners 2.1 The Supply And Demand For "Real Brew" Draught Beer Price (� per pint) Quantity Demanded (000s/wk) Quantity Supplied (000s/wk) 0.90 83 0 1.00 70 35 1.10 58 43 1.20 48 48 1.30 40 55 1.40 35 60 1.50 32 68 2.2 The Market For "Real Brew" Draught Beer �1.20 48 2.3 Shifting Supply Curves ?? ?? ?? ?? Market Environment Assignment 1 Duncan Frankham 23/04/2007 1 ...read more.

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