Ten Principles of Economics

Therefore, the analysis in this assignment will dive deeper to analyze the 10 Principles of Economics and strive to elaborate on how consumers make decisions and interact. Moreover, the assignment will explore how the society allocates scarce resources and the benefits achieved from economic interdependence. Finally, the essay will seek to explain how why the demand curve is download sloping while the supply curve is upward sloping. How People Make Decisions The behavior that manifests in an economy is a reflection of consumers' behavior. There are salient fundamental economic principles that influence how consumers make decisions. It is expected through trading, the trading countries can receive products and services at a lower cost compared to the production costs that could have been incurred should the country decide to produce the commodity or the service (Mankiw, 2016).

Each State has the opportunity to specialize in the production of a product is best at and import the ones she cannot produce at a minimal production cost. Markets exist to provide means of enhancing interaction. Through the exchanges, the firms can acquire the targeted labor. On the other hand, the households have the opportunity to decide how much to consume from the goods and services offered by the production firms. This causes in decline in the number of goods and services demanded in the market. The lower demand for the products and services affects firms adversely; thus, scores of laborers lose their jobs. To improve the economic performance, the government is required to formulate effective fiscal policies that will trigger economic development such as reduction of taxes on consumer goods.

Subsequently, the disposable will rise, and therefore, the demand for available products and services will increase necessitating the firms to increase the supply in the market. More labor is needed to meet the market demands, and thus more people can get employment. The quantity of a commodity tends to increase when the price of that good increases. Equally, the supply of good reduces when the price of that good reduces. Many factors such as price level determine demand elasticity. The effect of demand elasticity is that can cause a significant change in the quantity demanded. For instance, if a luxury watch producer has an abundant watches, he may reduce the prices of watches to enhance the amount of wrist watches demanded.