Article Analysis for Trends in Consumption Patterns

Solution Preview

Economics refers to the study of income, production, land, investments, taxes, government spending and labor. It is a study of choice. How people choose to earn and spend their resources. The choice needs to be made by individuals and countries about what goods and services they can buy and which ones they need to postpone. The reason for this choice making is that the resources are scarce. Economics is studied from two perspectives one is the perspective of governments of nations and seeks to maximize the production of countries. This perspective is called macroeconomics. The other perspective is that of individuals and firms. This perspective is called microeconomics.

Microeconomics refers to the study of economic activity from the stand point of individual firm or groups of individuals. It studies how firms, households, persons and states made economic decisions. Usually, the activities in markets are studied to determine how economic decisions are made, how these activities affect the demand and supply for goods and services. Microeconomics studies relative prices and market mechanisms.

The law of supply states that higher the price, the greater will be the quantity of goods supplied. In other words the quantity supplied is directly related to its price. Manufacturers will supply a higher quantity of goods at higher prices than at lower prices. This is a law that belongs to microeconomics and states that if all other factors remain constant, if the price of goods or services increases, the quantity of goods or service offered by producers' increases.

The law of demand states that when price increases, the quantity demanded falls. In other words the quantity demanded is negatively related to price. Or in other words if all other ...