Managerial Economics – Term Paper

 Question 1) Discuss: A company should produce and sell any product as long as there is market for it

Companies are set up with a sole purpose to produce goods and make the profit for the benefit of the society. While setting up a company, one main consideration is the availability of market. When there is a market, the investor can be assured of a ready market provided the goods are of good quality. However, the investor should first assess the competition in the market. There can be a market for the given product though the competition for the market may be high. In this case, the company should set up its strategies right so that they can capture a larger percentage of the market (Salvatore 2015). The claim to produce any product as long as there is its market may be true but there must be some considerations to it. The production cost may be so high compared to the gross profit that the company will earn. In this case, the availability of the market will be of no significance since its net advantage will not be reflected at the end of the production.

The above statement also not be true due to government regulation pertaining the production of any good or service. There are some products that have the ready market though the government has banned their production. Such products should not be produced as that will be going against the laws that are stipulated by the government. Additionally, there may be products such as alcoholic products that may have the market though the market may be banned from consuming such products. For instance, there may be teenagers who may wish to consume alcohol though it’s against the government regulation. Selling the products of such a market is also illegal and should be given consideration while producing products for sell in the market.

Question 2 a) Benefits of unemployment benefits to individuals

Unemployment benefits are given to individuals that have registered as unemployed. These benefits are given to an individual to help sustain him. The amount given does vary from one individual to another. The amount may be high when the unemployed individual lost his/her job in a well-paying position. In such instances, an individual will benefit because he will be able to sustain a better lifestyle. The unemployed individual will be able to provide for himself with the basic needs without depending on anyone.

Unemployment benefits also accrue some benefits to the government. To enjoy those benefits, individuals are taxed so that in case they lose their job they will enjoy the benefits. The government uses the tax collected for some production activity that will, in turn, generate more income to the country (Ehrenberg 2016). In this way, the government can initiate development projects within their territory.

2b) Costs of unemployment benefits to individuals and the government.

Unemployment benefits are accompanied with some costs that are incurred by both the government and the individuals. When an individual loses his job, the first consequence is experienced in the person’s standard of living. Most of the people do not save, and therefore loss of jobs renders one to the serious financial crisis (Inderbitzin 2016). A long period of unemployment can lead to an individual losing his production skill this impacting on the economy as there will be the loss of useful talent. Unemployment can take individuals to develop pessimism to training and education.

Costs of unemployment benefits to the society are also quite obvious. Governments pay a lot of money to the unemployed people. This money could have been used in production activity to earn more profit. This means that unemployment benefits hinder development in a nation. The government also does not enjoy income tax from the individuals who have lost their jobs. This is a reduction in the government revenue.

Reference

Ehrenberg, R. G., & Smith, R. S. (2016). Modern labor economics: Theory and public policy. Routledge.

Inderbitzin, L., Staubli, S., & Zweimüller, J. (2016). Extended unemployment benefits and early retirement: Program complementarity and program substitution. American Economic Journal: Economic Policy, 8(1), 253-288.

Salvatore, D. (2015). Managerial economics in a global economy (8^th ed.) New York, NY: Oxford University Press. ISBN: 9780199397129.