Six key ideas define the economic way of thinking:
1] A choice is a trade-off
Trade-off is expressed as opportunity cost for the most chosen alternate possible outcome. In other word, trade-off is sacrifice made to get something. An example is choosing to spend money on either vacation or on buying cell phone; here you face trade-off on vacation and cell phone.
2] Benefit is what you gain from something
Benefit is profit gained from something which determines individuals like and dislikes that respect their feeling.
For example, lawnmowers silencer cost 25% of its production, which will save lot of money.
3] Cost is what you must give up to get something
Cost is amount or expenditure (sacrifice) made to get something. For instance, ordering pizza of $10, which is the cost or sacrifice, made of $10 to get pizza.
4] People make rational choices by comparing benefits and costs
Rational choices are difference between cost and benefit, which depends on choices made to more benefit over cost.
For example, family decide to go in plane for vacation rather to drive, here plane will give more relaxation.
5] Most choices are how-much choices made at the margin
Making decision between playing cricket and completing assignment, here choice is not all or nothing but specifying how much time to spend over each activity. To make choices deciding an increment in use of time.
Marginal cost is opportunity cost to produce one more unit
Marginal benefit is profit received from producing one more unit of it.
6] Choices respond to incentives
Marginal cost and marginal benefits changes incentive we face and leads us to make changes in our choices.
We can predict how choices will change by looking at chances in incentives. Incentives reflects self and social interest.
1] Changes in price of related goods : the demand of apple is affected by the price of relative goods or products, generally those which are related to it as subsequent. Therefore, the demand schedule and demand curve for related goods are constant, so the demand curve change its position. When the price of subsequent goods decrease the demand for apple will fall and when the price of subsequent rises, the demand of apple will increase.
For example, when price of gas increase, demand of car will be affected. When price of gas will falls, the demand of car will be increase.
2] Taste and preference of the consumers: Their important factors, which determine demand of apple, based on consumers. A good for which consumers taste and preference are greater, its demand will be high and its demand curve will be at higher level. When taste and preference of people change, the demand will be affected.
3] Income of the people: income of people also affect the demand of goods. Greater the income of people, the greater will be their demand for goods. The income means the greater purchasing power. Therefore, when income of the people increases they can afford to buy more.
(a) Minimum wages are set for protecting or securing workers, who do not have power to bargain for better pay package or salary. Moreover, they wanted to limit severe poverty among worker.
(b) Critics of minimum wages attract opposition who observe wages as price controls to limit hiring workers. If the opposition is hiring workers at lower package than they might have restriction of doing, so they need to provide at least minimum wages.
(c) According to data, Seattles economy has increase. Since the initial rise in April 2015 the unemployment rate has decrease up to 1% , which state the employment has grown. University of California, Berkeley has compared employment in food-service industry increase from $11 to $13 and concluded that there was no effect on employment. However, by few member of the university of Washington has different conclusion describing that when first rise at $11 an hour employment didnt have effect on employment but in second rise to $13 lead to decline in both jobs and hours worked. They concluded that many hours were lost and average of $125 to low-wage worker per month in 2016. Others said there was no rise in employment at wages form $13 to $19, employment rates raised at wages $19.
(d) A firm effecting with minimum wages should determine scope by calculating employees earning below and above minimum, which helps me to assume that how many employees pay could get increase. Result of this tracking is no burden if they are fewer employees, but if they are too many employees need to take some decision about terminating employees those with no more need. Another aspect is audit, many owner are not aware about contract this led to provide information having necessary changes.
(e) Government set minimum wages for securing workers and protecting them. Along with this, they need to set some rules in favour of people to have good opportunity for employment. Firms should strictly obey both rules and minimum wages. This will help people to acquire jobs with good efficiency.