Microeconomics

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Microeconomics

The theory of microeconomics focuses on the behavior that firms and people reflect in decision-making concerning the distribution of inadequate resources and the correlation between these entities. In the article, “Real Time Economics: The Labor Market is Tight, the Economy is Strong, and Companies are Raising Prices”, the author uses microeconomics to assess the rationale for the decisions implemented by the American labor and production sector in respect to the recruitment of employees, prices of commodities, and foreign imports. The evaluation illustrates that aspects of the theory such as the law of supply and demand and the firms’ need to maximize profits are responsible for the practical choices implemented in the local labor market and the economy as a whole.

One of the fascinating behaviors that the article assesses concerning the economy involves the shift in demand for prospective job applicants. Accordingly, employers in the present labor sector concentrate on the recruitment of candidates with a little emphasis on academic partialities and particular skill frameworks (para. 1). In this respect, the law of supply and demand can explain the mannerism. The rule in question establishes a correlation between a resource’s supply and the need/demand for the respective asset. In application, the low supply of high-quality candidates in the modern economy has necessitated an increase in demand for the remaining populace. As an outcome, firms are more likely to expend their financial resources in favor of attaining more recruits.

Another key behavior that the article illustrates is the increase in prices for goods. The costs of purchasing products such as beer, recreational vehicles, soda, and other commodities have risen as an outcome of the tariffs imposed on parts and metals (para. 3). From a microeconomic standpoint, the phenomenon is explainable. Since firms are inherently motivated to maximize profits and minimize costs, they are more likely to raise the prices of their products. The implementation of new sanctions has also forced firms to concentrate on tactics that allow them to attain marginal revenue due to the extra expenses incurred in the manufacturing of more product units. Regarding the situation, companies will increase the prices of the commodities they produce to match the marginal revenue for the realization of maximum profits.

Lastly, the periodical looks at China’s current trade sanctions, particularly on U.S. imports and the consequences of the Trump administration’s tariffs on steel imports. Arguably, American almond exporters have experienced a drop in the sale of almonds following the application of a 50 percent levy on similar imports by China (para. 5). Alternately, the article argues that the implementation of tariffs on Chinese exports has forced the country to engage in increased levels of importation (para. 6). Both situations reflect the impact of increased costs on production and their consequent effect on the economy. Increasing tariffs on steel imports from China forces American manufacturers to opt for less costly alternatives locally, further encouraging economic growth. Similarly, China’s sanctions on U. S. almond imports necessitate a focus on cheaper alternatives, which facilitate the country’s growth.

The article, “Real Time Economics: The Labor Market is Tight, the Economy is Strong, and Companies are Raising Prices,” is a reflection of the extent to which microeconomic theories inform decisions related to trade and production. For instance, the U. S. labor market’s focus on recruiting applicants without a consideration on constraints such as merit and experience illustrates the increased demand for employees and the low supply of similar yet high-quality resources for the aim of increasing production. Additionally, the rise in product prices shows the firms’ focus on the attainment of maximum profit by balancing marginal costs and marginal revenue. The imposition of trade tariffs on Chinese imports and American imports by the governments in question reflect the correlation between importation, exportation, and economic growth.

Works Cited

“Real Time Economics: The Labor Market is Tight, the Economy is Strong, and Companies are Raising Prices.” The Wall Street Journal, 30 Jul. 2018. https://blogs.wsj.com/economics/2018/07/30/real-time-economics-the-labor-market-is-tight-the-economy-is-strong-and-companies-are-raising-prices/. Accessed 3 Aug. 2018.