Micro and macro economic on us trade Essay Example | Topics and Well Written Essays - 1000 words

Micro and macro economic on us trade - Essay Example Microeconomics pertains to the economic decision and choices that are made by individual consumers, firms and industries and the impact it has on the allocation of resources, demand and supply in economies of the market. As demand and supply determines the prices of goods and services available in the market, microeconomics also defines how prices feature in various economic decisions and vice versa. Micro economists are principally apprehensive about studying numerous reasons of market failure and signifying means to correct or stop them, mostly with the help of public policy or by involving the government. (Bernanke, 2003) Monopoly is one of these failures that the market faces. Monopoly mainly crops up when a business produces a good at too cheap a price that its competitors are forced to leave the market. In the US, true Monopoly is rare these days, still IBM, Microsoft and Wal-Mart are bordering to it. Whereas, Oligopoly strikes when, in a specific industry, some of the controll ing businesses collate and set the prices as per their choice for the entire industry to either fallow or leave the market. Oligopolistic industries in the US include accounting and audit services, aircraft, military equipment, music recording industries and film. (Dwivedi, 2002) Businesses that are well-built may consider monopolizing the market by either controlling all possible ways of production or purchasing industrial resources, therefore forcing the competitors to shut down and leave. Not all businesses are granted the rights to monopolize an industry as some governments do intervene and stop such acts. Monopolies and other failures of the market are deemed undesirable and inefficient means of allocation of resources, by the micro economists, and that is the reason why they are not acceptable in any industry. It is suggested by these economist that Perfect Competition shall be utilized to balance the demand and supply ratios. It is the only mean whereby no single firm or indi vidual rules the market price of the goods or services. The price of the product is determined by its total cost and the profits depend on the demand the product has. Perfect Competition maximizes both consumer utility and the profits of a firm while utilizing the resources in an efficient manner. Sadly, these suggestions are seldom infallible as economics consists of numerous interactions between various market forces that are complex in nature. It is almost impossible to foresee the outcome of any economic policy. The job of micro economists is to suggest resolution of market failures that has the finest effect no matter what the inadvertent costs are. (Gwartney, 2009) Microeconomics also determine the most suitable policies keeping in mind the reaction that will be derived from the incentives and disincentives given to the public in such policies. For instance, in the US industries are allowed in urban areas the smoke and particles of chemicals will damage the water and air in th e locality. This will not only make people fall sick, resulting in increase of healthcare facilities and medication and but also hurt the ecological lifecycle of that area. Furthermore, due to the lost beauty of nature, tourism will also be affected. To prevent such hazards, the government controls the areas where such industries are allowed to function, on the advice of the micro economists. If the company does not find this condition conducive to their profits they may choose to relocate elsewhere this would increase unemployment in that area therefore the government may opt to give them some incentive to stay back. This may include a tax break for sometime till they make enough profits to accommodate this policy