Essays on Microeconomic

Essay 1: Current US Microeconomic Event

Certain businesses and individuals respond in a specific way, especially to limited resources. Scarce resources mean that these businesses or individuals cannot buy everything they want and therefore they have to make critical decisions to utilize the scarce resource to their maximum advantage. For people, the most important thing when making these decisions is personal satisfaction while for firms or businesses, important factors include saving time and money which are scarce resources to maximize the profit. One of the most critical microeconomic markets in the US currently is the manufacture and sale of electric vehicles from Tesla. Tesla is the only company producing popular electric vehicles in the US; demand is very high, hence, using microeconomic principles, the company has had to adjust to the market demand regarding prices and the production rates, while bearing in mind the affordability of the electric vehicles by Americans.

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The principle of maximizing utility can be seen in effect in Tesla microeconomic market. This principle points out the fact that companies and individuals make their decisions in a certain way to maximize their satisfaction. Since Tesla's vehicles are in high demand because they do not use any environmental pollutants and are far cheaper to operate than the gas powered vehicles, the company made important price decisions. Tesla, for example, has been receiving preorders of up to 350,000 for its Model 3 Sedan alone. Tesla chose to price its vehicles in a way that both the company and the consumers would be satisfied. Tesla's Model 3 Sedan was priced at $35000.This price despite being costlier than the average oil-based fuel powered vehicle, it will be relatively affordable to the masses in the US who want to own electric vehicles. The prices also reflect the long-term affordability of Tesla's electric vehicles which are very cheap to operate.

Opportunity cost is another important microeconomic principle that businesses and individuals must consider in their decision-making process. The next best alternative to Tesla's electric vehicles is petrol powered vehicles. This vehicle has demonstrated their worthiness for a long time and can withstand the worst of weather and economic conditions. These vehicles are also relatively powerful and have more horsepower as compared to electric vehicles. Therefore, individuals seeking to buy Tesla's electric vehicles have had to bear in mind the fact that they will be running on a lower horsepower vehicle. However, the almost inconsiderate costs of running electric vehicles coupled with the fact that they are environmentally friendly means that individuals have had to prefer electric vehicles over petrol powered vehicles.

Supply and demand is a critical principle that Tesla firm has had to take into consideration. The company has been struggling to meet the demand for the highly popular electric vehicles in the US. For example, when Model 3 Sedan was first rolled out, the company received over 350,000 preorders. To accommodate the very high demand for electric vehicles in the US, it meant that the company had to increase its production rates. First, the high demand made the company to price the Model 3 at a relatively high price of $35000.Next, the company expanded its production strategies and plants. To meet the goals of expansion, the company has had to sell over $1.4 billion in stocks. It has also had to overhaul its manufacturing program to increase the pace of production. To ensure that quality is met with the increased production rate, the company has gone on to hire veterans in the automobile industry to run its activities.

Businesses and individuals must make decisions on scarce resources and services to ensure maximum satisfaction and profit respectively. For Tesla customers and the company's managers, given the fact that Tesla electric vehicles are in very high demand in the US, decisions have been made based on microeconomic principles. These principles include opportunity cost, maximizing utility and also the principle of supply and demand. Adhering to the microeconomic principles has seen both the consumers of Tesla's electric vehicles and the Tesla production company itself enjoy maximum satisfaction and profits respectively.

Essay 2: Current Foreign (Non-US) Micro-economic Event

Saudi Arabia's has recently been grappling with very low oil prices due to a variety of factors. The first factor is that there have been new oil discoveries and extractions in several parts of the globe and this has affected the supply and demand of the resource. The next factor is that the country has recently been hit hard by allegations of the state involvement in the murder of journalist Kashoggi. This has led to an international outcry and has had serious economic implications including a drop in the oil stock market. Saudi Arabia has made various decisions based on microeconomic practices and principles due to dwindling oil prices to ensure the satisfaction of the country regarding revenue and profit maximization.

One important microeconomic principle reflected by Saudi Arabia's oil decisions is the principle of supply and demand. One threat that the country's oil sector has had to grapple with for a long period is the high oil output all over the world that is normally propagated by American and European companies.This means that there has been a very high supply of the oil products in the market and therefore a low demand.The high output has always meant one thing for Saudi Arabia- low oil prices. Given the fact that the country is highly reliant on oil as a foreign revenue earner, drop in oil prices can affect the economy. To rule the oil market, Saudi Arabia has been using one strategy; increasing oil production to unprecedented levels while decreasing prices. The decision to increase oil production is driven by the fact that oil production in Saudi Arabia is cheaper than almost any other part of the world. This means that by producing very high volumes of oil while reducing prices, the country can smother its competitors who have to struggle with high costs of production. Having beaten the competitors, the country can the stabilize oil prices.

The concept of diminishing marginal utility has also been reflected in Saudi Arabia's decisions based on the oil markets. For a long time, the middle eastern economies have relied heavily on oil exports as their main direct foreign revenue earner. Saudi Arabia is one of those countries that has its economy almost entirely hinged on the oil markets. One critical factor considered by the oil-reliant country is that as time goes by, there would be lesser and lesser market for Saudi Arabia's oil. This can be ascertained by the fact that most developed countries who are the main markets for Saudi Arabia's oil are planning to start phasing out diesel- and the petrol-powered vehicle in the next four to five decades. The decisions to phase out oil-based fuel operated engines by most countries is mainly because oil products are heavy environmental pollutants. According to the Paris world climate agreement of 2015, the use of environmental pollutants should be minimized at all costs due to the effects of rapid global warming being experienced worldwide. Given the fact that Saudi Arabia will be receiving lesser and lesser oil revenues shortly, the country has embarked on rapid industrialization programs that will substitute for the oil incomes in the future. This decision will shield the country from inflation and a potential economic crash.

Saudi Arabia has been able to remain a dominant player in the oil market despite crippling oil prices and diminishing markets by utilizing microeconomic practices in its decision-making processes. The principles of demand and supply have always governed the country's decisions in a bid to remaining an important world player in the oil market while maximizing on the oil revenues and profits. The country is currently struggling to become a relevant world economic player in determining oil prices even in the wake of allegations of involvement in the murder of journalist Khashoggi. This incident could lead to economic sanctions that might affect its oil market. However, based on past decisions made by the country using microeconomic guideline practices, the country will surely overcome the storm.

Essay 3: Microeconomic Lessons from the "Agony of Reform"

In the late 20th century throughout the cold war, most nations tried to attain economic prosperity through firm government control over the economy. The ideology of communism mainly drove these countries. The "Agony of Reform" represents an insightful view about the manner of capitalistic revolutions undertaken by Russia and the Eastern bloc nations at the height of the cold war from a microeconomic perspective. Various microeconomic lessons can be drawn from the economic calamities experienced by countries such as Bolivia, Russia, India, Chile, and Poland.

Microeconomic policies were invoked to enable to enable recovery of economic recession. Chile was hit hard by its attempt to nationalize all industries in the country. Nationalization of industries resulted in sluggish and poor-quality production. As a result, there was a massive inflow of quality and cheaply sourced foreign manufactured products. Chile began limiting the importation of goods which could be locally produced so as to avoid revenue outflows. The government also began subsidizing locally produced products to make them affordable. This policy led to the economic success of Chile and other South American countries.

Russia undertook significant microeconomic reforms. The first reform was through a change in government structure. The authoritarian market regime was phased out to give way to a liberalized market system. The reforms were immediately reflected by how the government dealt with exchange rates, trade and also prices. Government spending was also readjusted proportionately. The central bank of Russia also began phasing out slack policies which often led to inflation issues. Monetary reforms were followed by rapid privatization of enterprises. The privatized enterprises were also guided on how to formulate policies to cope up with the increasingly competitive market. Government regulations on state-run companies were ramped up. The Russian military spending was considerably reduced to boost enterprises. These reforms are what led to a rapid economic turnaround in Russia.

Countries such as India and Poland who had embraced economic democracy to some extent began utilizing microeconomic policies. Poland, having earlier embraced free-market policies began introducing monetary policies to curb inflation. Also, the country began restricting imports through policy formulation while increasing exports. This improved market for locally produced goods and services. Due to Poland's flexible labor market, the country's economy quickly picked up. Local industries expanded to meet for the growing demand for its goods and services. India is one country that managed to achieve substantial economic progress by embracing the free market revolution. This involved boosting the private economic sector using government mechanism. The country also formulated policies to overcome corruption which had crippled government-run enterprises. As a result, the country began recovering from economic woes.

Russia, Poland, India, Bolivia, and Chile managed to overcome economic calamities by implementing rapid microeconomic practices and practices. Microeconomic policies such as privatization of state-run enterprises and the regulation of the monetary sector are what led to the realization of economic success. India's embrace of free markets using government mechanisms ensured that its car maker began producing enough vehicles to meet the market demand withou...