Fascinating economy. Larissa Zaplatinskaia
all goals different players have in the game of economics.
– Although goals are sometimes incompatible with one another, they still must be set in order to play the game of economics.
– Scarcity occurs because resources are limited. This is one reason why allocation decisions are so important.
– The fundamental questions faced by all economic systems are: What will be produced? How should production be organized? How will goods and services be distributed? What is the most effective allocation of resources?
Chapter 2
You live in a world where goods and services are essential. Can you imagine what the world would be like if you could not buy food, use public transportation, or attend classes? The goods and services you use every day are important. Your life would not be the same without them.
In the game of economics, different players produce and consume these goods and services. Consumers and producers make the decisions that drive the game of economics. They gather information and weigh options before making a choice. They ask themselves certain questions: How much am I willing to spend? Or how much should I produce?
The way people answer these and other important questions determines how they allocate resources. And this in turn affects the production, distribution and consumption of goods and services. Economics is powered by the many decisions made by players. Examine how the various players go about making these important decisions.
Economics is like a game. It has rules, properties, outcomes, and players. We all play the game of economics, and of course players are an important part of any game. They make the decisions that drive the action. Economic players make decisions about what to produce, sell, and buy.
Any time you buy something, you are playing the game of economics. You are participating in the economic system. To understand the importance of your role as a player in the economy, as well as the roles that other people play, examine what the many different players do.
People also have wants – that is, things they desire but could live without, such as concert tickets or the latest basketball shoes. Everyone has needs and wants, and everyone tries to fulfill both, if possible.
Everyone plays the game of economics all the time. Even the simplest actions are economic actions. For instance, if you download a ringtone to your phone, you are playing the role of a consumer. Your cell phone is a good.
Consumers make purchases depending on what they need and want. But of course, they must also consider how much money they have to spend, and the prices of the things they want. The decisions made by consumers send messages. The ring tone is a service. Your cell phone provider plays the role of producer.
In every type of economic system, there are exchanges between consumers and producers. The decisions that consumers make influence the decisions of producers. Producers decide what and how much to produce, depending on the desires of consumers.
Consumers
to the other group of players, the producers. Consumers let the producers know what they want to buy and the price they are willing to pay. Every time a consumer decides, it sends this kind of message.
Price has a major effect on a consumer’s decision to buy. If the price of a movie ticket is too high, you might stay home and watch a DVD instead. On the other hand, if the movie theater slashes prices, there will be long lines at ticket office of consumers waiting to see the latest release.
The important role that consumers play includes deciding
– What products and services to use and buy.
– How much to buy.
– What price they are willing to pay.
Producers
Consumers make purchasing decisions, but there would not be anything to purchase without producers. Producers try to satisfy the needs and wants of consumers. They provide consumers with such goods and services as clothing, food, entertainment, and healthcare.
To be successful, producers have to determine what consumers want and how much they are willing to pay. Producers make all their decisions based upon the decisions made by consumers. So, producers are always trying to predict what consumers will want next, and how much they will pay for it.
Have you ever been to a water park? How many services do you buy for the price of admission? You can go down a variety of slides, swim in a wave pool, or maybe even watch a live show. At a water park, producers offer many goods and services in one place. To make a profit, they must be able to anticipate how many consumers will want to buy their many goods and services, and what they will be willing to pay.
Producers play an important economic role. They decide what to produce, how to produce it, and for whom it will be produced. If they make the right decisions, they will satisfy consumers’ needs and wants.
Workers as Economic Players
Producers produce the things that consumers buy. These things have to be made. The people who make the goods and provide the services sold by producers play an important role in the game of economics. We call these players workers.
Workers create goods and services.
Workers, however, are not a third group of economic players. When they make or provide goods and services, they act as producers. But when they purchase things, they act as consumers. Workers play a dual role. They are producers and consumers.
Workers as Consumers and Producers
Workers straddle the line between consumer and producer. Sometimes these two roles can be played simultaneously. For example, when a restaurant employee is sent out to buy potatoes, that worker is both a producer (someone making food) and a consumer (someone buying food).
Open Workers as Consumers and Producers. Sort the activities into the correct column to show when a worker is playing the role of a consumer, a producer, or both.
Businesses as Economic Players
When they make goods or provide services, workers play the role of producer. But it takes more than workers to offer those goods and services to consumers. For instance, a restaurant is more than just a group of workers who decide to make and serve food to people. A successful restaurant needs someone to apply for the appropriate permits, rent the building, hire employees, buy equipment, and oversee production.
When a person or a group of partners decides to undertake these tasks, they start a business. Businesses provide the goods and services the consumers want by hiring, organizing, and supplying workers. Nothing would get made without workers. But it is the task of businesses to get those things to the consumers who want them.
Business Activity
Businesses drive most economic activity. Without businesses, workers would not have anything to produce, and they would be unable to earn money. Without money, they could not play their other economic role as consumers.
When a new business opens, jobs are created for workers. Businesses are producers. But they also provide what the economy needs for consumption. They pay workers what they need to consume the goods and services offered by producers.
For example, when Dell Inc., a computer company, opened a factory in Austin, Texas, in the 1990s, the company provided thousands of jobs for workers in the area. The new workers then had money they could spend on goods and services. This boosted local businesses and created even more jobs in the area. In turn, this led to workers