“dynamics” of the models when prices or income are changed

 “dynamics” of the models when prices or income are changed

Economic problems arise in the economy because of the scarcity of resources to fulfill basic needs. Producer and consumer problems are significant economic problems that affect society. Consumption and production are, therefore, considered two different problems. Concerning a given price, producers opt to produce to solve producer problems as the consumer choose to consume to solve the consumer problem. This phenomenon is well illustrated using Max’s happiness subject to budget constraints. A societal-level producer problem could be quickly resolved if the prices of functional PPF form and calculus are known. Since calculus is not majorly applicable in this module, a producer problem is therefore solved individually. When the resulting solution is expressed as “all x-axis good or “any point along the PPF, then the slope of the revenue line is the same as the opportunity cost of the goods on the x-axis. A producer problem for both individuals and society through graphical solutions is also showed. Additionally, consumer problems can be solved if the prices are known by putting the solutions of consumer problems into graphs and practice with the “dynamics” of the models when prices or income are changed.

Nonetheless, all producers are consumers, and all consumers are producers. This means all people in the economy acts as consumers at some point and producers in some other way. The revenue brought by the consumer will become an income spend by the Producer. Generally, producers are happier when they end up with more incomes, and individuals tend to increase their revenue when they are acting as consumers, having in mind that they will, in the long run, assist in ensure their happiness as producers.

For example, when two goods in an economy are considered (corn and wheat) with PC = 6 and PW = 12. The Producer’s problems will be solved. He will make 12 wheat, earning R=120. He can, after that, go to the market and buy 20 units of corn at $120 he made by producing wheat.

To begin this illustration, if an entire economy is made up of an individual. As a consumer, he will decide how much corn and wheat to consume. There are published prices for goods, but ideally, the prices will not attribute in this situation because there is only one-person i the entire economy, therefore he will consume all his products since there is no one to exchange with through buying and selling. A posted “price” used to come up with Producer and consumer problems will therefore not considered at this point.

In an ideal economy with several producers and consumers acting in the same business environment, product prices are set by all the participants. However, in the one-person economy, which rarely exists, an individual builds a perception about change in prices and how it results in different decisions to be made on Producer and consumer problem solutions.

In summary, an essential lesson from the one-person economy is that:

In an event where the intended consumption of goods and services is higher than the amount produced, it reduces waste. The price of goodwill, therefore, increases until the expected use and production are equalized.

Among the major economic problems in society are issues of Producer and consumer, they can be used to create economic models. Economic models are meant to envisage future economic results and important information that might need to be omitted intentionally; in other words, economic models are the generalization of reality. Some economic models are more of scientific models; however, economic models are simplifications of economic reality that are intended to produce hypotheses on economic behaviors that can be established. Models are constructed to evaluate the ideal situations as clear as possible, and it makes the entire economic situation observable, easy to understand, and predictable; therefore, the pretty look like scientific models.

In conclusion, producer problems aim at improving the revenue and disposable income of the consumers and, at the same time, assumes changes in production steps and technological situations are also expected. On the other hand, consumer problems are focused on consuming other than considering information on income returns of the consumer and variations in fashion and quality preference of the customer. All this information should be achieved should models be used because economic models make them more realistic.