Introduction The reason said consumers better off as a result of economic rationalism because consumers can enjoy more fairness in the market. For instance, consumers have more information about price, utility, quality and product materials that they can compare with substitution in the market and select the best fit product. Also, economy closer to free market can inspire product innovation. The concept of economic rationalism aim at market efficiency to reach entire society interest maximization, through deregulation, a free market economy, privatization of state-owned industries, lower direct taxation and higher indirect taxation, and a reduction of the size of the welfare state, for example, privatization of public utilities and free trade …show more content…
Consumer can benefit in cheaper goods, when presented with two products that offer similar benefits, customers vote with their purchases and decide which product will survive. Customers also determine the ultimate price point for a product, which requires producers to set product prices high enough to make a profit, but not so high that customers will hesitate to make a purchase. Except consumer can benefit in cheaper goods, corporate access to larger markets means that firms may experience higher demand for their products, as well as benefit from economies of scale, which leads to a reduction in average production costs. Providing an incentive for countries to specialize and benefit from the application of the principle of comparative advantage. Globalization enables worldwide access to sources of cheap raw materials, and this enables firms to be cost competitive in their own markets and in overseas markets. Seeking out the cheapest materials from around the world is called global sourcing. Because of cost reductions and increased revenue, globalization can generate increased profits for …show more content…
Economic rationalists insist that the public sector tends by nature to be inefficient, in part because it is not subject to the market disciplines which the private sector faces. Indeed economic rationalism tends to privatization of public utilities, like electricity, gas, airports, railways, telecommunications. Many other government bodies have been corporatized or required to operate on a pay-for-service basis. Privatization is not only an end in itself but also serves an educational function by transforming public attitudes toward ownership and economic responsibility. The result will be an increase in net economic welfare: the economy will become more dynamic and scarce resources will be allocated more efficiently. In capitalist theoretic, the profit motive is said to ensure that resources are being allocated
Throughout history, many different types of economic models and theories have been developed. These different philosophies of business often were an important and integral part of a government’s basic structure. For example communist countries like China and the Soviet Union practiced a type of socialism. While, democratic nations like the United States and Canada practice forms of capitalism. Also within these economic models exists different theories as well such as Keynsian economics and laissez faire economics. To understand how these types of economies work in the world today, it is important to study and define a variety of economic systems. Researching such economic systems as capitalism and socialism, and also looking at the ideas of laissez faire and the Keynsian economics, a person will start to have a better understanding of how business works in the world today.
If an individual wants to open a dental practice out of their tool shed in their backyard, they can. Economic freedom allows people to literally have freedom. Capitalism answers the three economic questions (who produces, what is produced, and for whom) by creating a product market based on what consumers want. By illuminating small businesses, the larger ones can be more successful at answering and fulfilling these questions. Economic freedom also ensures that government interference will not occur. Freedom also gives workers the freedom to change jobs. An employer cannot contract in an employee and cannot blackmail said employee for quitting. The worker has the right to switch jobs to better their life. The next key economic goal is economic efficiency. Economic efficiency is the ideal use of all scarce resources. This prevents waste and helps ensure the lowest cost possible for a product. Efficiency allows employers to fire employees who are old, sick, or anyone who slows down the production. The employers are able to fire employees without any repercussions such as workers’ protection laws. Employers are also allowed to hire child workers. When an
⑥ Buyers. Buyers’ benefit from quality products, which is related to corporate profitability, repayment capacity and operational capabilities.
In a perfectly competitive market, the do not benefit, the consumers do. The consumers have the option of going elsewhere if they do not like the price that a producer is offering, which gives them the
- The free market economic theory provides the rationale for the managerial responsibility to make as much money for their stockholders as possible. The justification of the free market is based on the utilitarian ethical principle that one should act so as to maximize the overall good. Therefore, the overall good in terms of the economic model is that of the stockholders.
Neo-classical economics assumes that workers and employers are perfectly rational and that labor markets function efficient...
ECONOMY: Economy as the first pillar mainly concerns with the allocation of scarce resources for optimum development. It involves the combination of available resources in their right proportions for the provision of goods and services. It is the careful use of resources and it involves the best combination of resources for optimum result. In public administration it is expected that quality public service be provided at the least possible cost. Public officials therefore must figure out how to provide services required by the people at the lowest cost through cost saving mechanisms while still maintaining quality. The employment of economics in the public sector ensures that resource usage is optimized and not wasted as usually happens in the public sector. Another dimension is to look at economy in terms of the deployment of resources in order to achieve the optimal benefit from them.
For commodity goods, consumers are more inelastic to price changes. As commodities are at affordable price, the price differences are rather small. Therefore, lowest price is not a main concern for most consumers.
It can be accomplished by sale or lease. It can be accomplished by the government selling 100% of an enterprise, or selling 51%, or even by selling a minority stake - so long as the private sector is given full managerial control. Without transferring control to the private sector, the government can rise money by selling a smaller share, but that is not privatisation as such.
Individuals and privately owned companies possess the majority of the means of manufacture. The resources used to produce goods and services are privately owned. The resources that are produced are also privately owned by the individual or company. In this type of system, workers have choice about what sorts of work they will do and the opportunity to change jobs. Individual initiative allows individuals have the liberty to start and operate their own businesses. In a free enterprise system, citizens control the production and distribution of goods and service. Citizens are also allowed to gain from their own investments or undertaking. Since individuals control the production of goods and services, multiple individuals and companies will offer the same goods and services. In order to receive more profit and to blow the competition out of the water, companies need to maintain higher quality at a lower price.
With there being several firms for 3 of the markets, the consumer benefits as they can find the cheapest producer, resulting in the producer being at a disadvantage as they could loose business. In a perfect competition market, the firm is unable to choose the price whereas in an oligopoly the price is chosen by the firm this is beneficial for the producer as it increases their profit margins. However, this is harmful for consumers as they will have to pay the higher prices.
Hayek writes, “for any mind to comprehend the infinite variety of different needs of different people which compete for the availability of resources and to attach a definite weight to each… it is impossible for any man to survey more than a limited field, to be aware of the urgency of more than a limited number of needs” (Hayek 44). This shows that the efforts of the government to direct the economy as a whole are profoundly flawed. This is because what one person defines as good is inherently different from what another defines as good, therefore a collective good is impossible to establish. This lack of a collective good ultimately leads to misguided plans for the economy where resources are not necessarily devoted to where they are best suited. This also leads to a system where one group must inevitably sacrifice its production for another’s.
The Effect of the Development of Large Firms on Society Many firms choose to expand in size because of the cost and market share benefits the firms can reap. However, the development of large firms may not always be of benefit to consumers, and the advantages and disadvantages will be discussed in the following essay. Because larger firms such as Shell Petrol Station are able to experience internal economies of scale through lower unit costs, many of the cost savings are then passed on to the consumers through lower prices. Hence consumers are then able to enjoy greater consumer surplus, defined as the difference between the maximum price that a buyer is willing to pay for a good or service and the actual price paid. As seen from the diagram below, the marginal cost curve shifts to the right such that the new marginal cost = marginal revenue equilibrium lowers the price and increases the output level compared with the initial equilibrium.
There is increased competition- This is a consequence of capitalism. Increased competition leads to improvement in terms of quality and efficiency of production. It also leads to low prices of products in the market, as producers want to have a larger share of the consumer market. In a capitalistic perspective, businesses that produce high quality products at a low price enjoy a larger market share.
Comparative advantage, in economics, refers to the ability of one group or company to produce a good/ service more efficiently than another (Lipsey, R. G., & Dobson, W. 1987). Determining how efficient the goods/services are depends on how low the marginal and opportunity cost are in contrast to another company. To explore the concept of comparative advantage, we must first analyze the concept of marginal and opportunity cost. Marginal cost is the actual cost it takes to produce an additional good. For example, if a company producing additional televisions requires building a new warehouse, the marginal cost of the extra television, includes the cost of the new warehouse. Marginal cost may be effected by market failures. Market failures are the concept by which economist use to describe why the free market system doesn’t work efficiently (SalanieÌ, B. 2000). There are many factors which affect the marginal cost, which include negative and positive externalities.