Economics Case

Introduction

This writer has often wondered why food costs rise when gas prices begin to spike. Economics being the study of the production and consumption of goods; is also the transfer of wealth to produce and obtain those goods. Economics used to baffle this writer until studying this course took the mystery out of what it really is all about. Economics explains how people interact within markets to get what they want or accomplish certain goals. Since economics is a driving force of human interaction, studying it often reveals why people and governments behave in particular ways.

As this writer explored economics, there were an abundance of concepts within this field of study. This writer has chosen eight concepts to research within this paper. Those eight concepts are: diminishing marginal utility, elasticity, government intervention, labor market, market failure, monopoly, monopolistic competition, and theory of the firm. Each of these eight concepts will be individually defined; explained in this writer’s own words, and a business example will be given.

Also, within this paper this writer will explain the influences of economic principles and systems as to their relevance on this writer’s increased understanding dealing with faith, the future role as a citizen, Christian, and voter. This writer will then give a conclusion and list all references used with in this paper.

Concepts

The following are eight concepts identified, defined, explained and a business example given to illustrate the economic significance.

Diminishing Marginal Utility

Definition: Investopedia (2012) states, “the law of economics states that a person increases consumption of the product while keeping consumption of other products constant there is a decline in the marginal utility that person derives from consuming each additional unit of that product.”

In essence, this means that in any production function, as the input of one factor rises holding other factors fixed, the marginal product of that factor must eventually decline. According to Colander (2010, p. 233), “When consuming a good becomes torture (meaning its utility is negative), you simply don’t consume any more of it.” An example of this concept would be to consider on a very hot day you began to drink successive glasses of lemonade. The first glass just begins to quench your thirst. After two glasses, however, the thirst has all but disappeared. A third glass could possibly provide some utility but not as much as the second glass. You can’t finish the fourth glass. What is obtained from drinking lemonade on a hot day is increasing for the first two glasses, but is decreasing beginning with the third glass and will continue to decrease if one were to consume more glasses. Diminishing marginal utility simply means that