Microeconomics Assignment Essay

Topic 1: Supply and demand

Traditionally, the supply and demand were viewed as key elements of the open market economy which define the major market trends. To put it more precisely, the correlation of supply and demand influence consistently pricing policies, the availability of products or services to customers as well as the interest of customers to these products and services and the desire to buy them. In fact, many specialists agree that the supply and demand can hardly lead to the stability in the market and changes of the supply and demand can influence consistently the dynamic of the market and industry development. As  a rule, the shortage of products or services available to customers provokes the growth of the demand, while the excessive growth of supply lead to the gradual decline of demand for goods and services. This principle can be traced in different industries. In this respect, the example of the oil industry and the substantial fluctuation of oil prices in recent years perfectly reveals the close interdependence between supply and demand.

In fact, the rapid growth of oil prices, for instance, is traditionally accompanied by a consistent decrease in the oil production, while the demand for oil remains steady or increases. As a result, the shortage of supply and the growth of demand result in exorbitant oil prices, but, as soon as demand drops and supply gets stable oil prices drop respectively. In fact, it is a common rule of supply and demand which can be traced in other industries.

However, specialists point out that the rule of supply and demand does not lead to the availability of products or services to average people. In fact, it is due to the changes in supply and demand business get consistent profits.

Topic 2: Price controls

Basically, the regulation of prices by the state is considered to be not a very efficient economic tool because it contradicts to major principles of the open market economy. In fact, the price controls are often grounded on populist intentions of the authorities since with the help of price controls they attempt to improve the socioeconomic position of the most disadvantaged categories of the population. In this respect, it is possible to refer to the example of Venezuela, where price controls are widely implemented to minimize negative effects of failures of the authorities to improve consistently socioeconomic situation in the country. In such a context, price controls are used to manipulate with the public opinion and tackle burning social problems through the minimization of expenses of certain categories of the population or companies. In fact, the price controls can aim at the improvement of the position of certain categories of the population but they inevitably force some companies and business to pay more to compensate losses of price controls. For instance, the current gas prices policies in Quebec aim at the improvement of the position of small oil retailers, while it is customers who should pay more to compensate losses from the price controls. Consequently, it is obvious that the development of price controls lead to the misbalance of economic development and it may be used to encourage the development of certain industry or to maintain certain categories of the population but it cannot be applied in a long-run prospect because it will be extremely difficult to control prices without harmful effect to the national economy at large.

Topic 3: Productivity

Today, productivity plays an important role in the economic growth of entire countries as well as in the consistent improvement of marketing position of companies. In this respect, it should be said that productivity was traditionally used as the accelerator of the development of companies, which used the productivity to ensure a steady growth due to the growth of production and sales. At first glance, the productivity can boost the development of certain industries, such as energy industry in Europe. In such a way, the growth of productivity allows companies to use their human resources more efficiently without employing more professionals. On the other hand, the productivity has a negative side-effect because while boosting productivity, companies cut off a considerable number of employees from the opportunity to be employed. To put it in simple words, if the same number of employees can produce more, a company does not need to employ new specialists to expand business. In such a situation, the productivity can influence the labor market consistently. However, the decline of productivity does not necessarily mean the decline of unemployment. For instance, the USA suffer from decrease of productivity, but the unemployment rate has not dropped consistently. In such a way, it is obvious that productivity mainly refers to the performance of companies. In actuality, the productivity is still a perfect opportunity for companies to save costs and increase their revenues if they may manage to provide a steady increase of productivity.