A Basic Analysis Of The Balkan Economy In Relation
This essay A Basic Analysis Of The Balkan Economy In Relation has a total of 10166 words and 58 pages.
A Basic Analysis Of The Balkan Economy In Relation To The E.U.
A Basic Analysis Of The Balkan Economy In Relation To The E.U.
I think that it is right to begin with
the Theory of consumer choice. The above consumer has expressed his
preference of choice. He has a taste for seafood which he prefers
above all other types of food. This does not mean that he only eats
seafood, but in line with the last two elements of the theory of consumer
choice, he has shown his preference for taste and on that assumption, will
do the best that he can for himself to consume as much seafood as he can.
The elements of the theory which govern exactly how much seafood he will
consume are the first two, namely the consumerís income and the price of
We can assume therefore, that the consumer
will devote as much of his budgeted income for food, to as much seafood
as he can afford in preference to other foods such as hamburgers.
A budget line can be drawn up to show
a trade off between say, fish suppers and hamburgers to indicate the combinations
of fish suppers and hamburgers the consumer can afford given his income
and the prices of each meal. Points on the buget line will all be within
the consumers budget for food. All points below the line will show the
possible combinations of dinners avaiable for his choice. All points
above the line wil be unaffordable. It will be possible to see how
far the consumer could indulge his passion for seafood in one week.
(Slope of budget line = -Pu/Pv)
The next considerations that might be
taken are the marginal rate of substitution of one meal for another without
changing the total utility, the diminishing marginal rate of substitution
which will hold utility constant and representation of taste as indifference
curves. I will not elaborate on these at this point as I believe that the
marginal utility and diminishing marginal utility are more relevany and
pertinent to the question.
I shall now contunue by defining
utility. In economic jargon, utility is a numerical method of appreciating
a consumerís satisfaction. The word itself, as far as meaning is concerned,
has nothing to do with its meaning in everyday language. It has nothing
to do with usefulness, it is a satisfaction based unit of measurement.
Marginal utility on the other hand is,
in a sense, an extra utility. What is meant in economic jargon by marginal
is the additional pleasure a specific good gives to a consumer.
Diminishing marginal utility is the marginal
utility lessening due to the growth of consumption. For example, a consumer
consumes a pound of fish, and his utility is 10 units, and his marginal
utility is 10 units. If the same consumer consumed two pounds of fish,
his utility would be 15, but his marginal utility would be 7. The same
effect on marginal utility would take place if the amount consumed further
increase. Since marginal utility diminishes as the quantity of fish consumed
increases, we are faced with diminishing marginal utility.
The point is that no matter how good the
the consumerís fish dinners are , the more that is consumed, the less satisfaction
will the consumer have compared to the initial portion. This of course
is down to personal taste, for consumer A may have a diminishing marginal
utility that decreases a lot more slowly than consumer B. The fact
remains, that at some point, both comsumers will become saturated by their
love for seafood and the law of diminishing marginal utility will make
Our consumer, as this point, will seek
to substitute some of his fish dinners with hamburgers or another alternative.
To conclude, the title question based
on the argument above, the statement: "I love seafood so much I canít get
enough of it" may be passionate, but economically speaking is implausible.
Even if theoretically speaking the consumer had access to an infinite amount
of seafood and an unlimited budget, in the end the good would not satisfy
the consumer enough to remain a preferred good, thus this change in preference
would result in the consumer literally having had enough.
First we must consider suppy and demand.
Supply is the quantity of a good that sellers want to sell at every price.
Demand is the quantity of a good that buyers want to buy at every price.
Equilibrium is the point where the supply is equal to the demand. At a
particular price these behaviours become quantity supply, quantity demand
and equilibrium price.
We must now look at the elasticity
of supply and elasticity of demand. The elacticity of
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