Economic Analysis and Modern Problems

Economic Analysis and Modern Problems

Terry Scott

Professor Obi

ECO: 100

May 05, 2013

Economic Analysis and Modern Problems

Economic analysis provides answers to real-world problems. Economists use the economic way of thinking in order to solve problems and make decisions (Sullivan, Sheffrin, & Perez, 2012). The purpose of this paper is to take the real-world scenarios of economics and analyze them for their respected behavior. These scenarios include how an economist would approach alcohol abuse and how prescription drugs affect the demand and supply of other goods and services. Elasticity of demand is important consideration when analyzing the shift in supply and demand. I’ll also go into detail on the increasing-cost industries and a perfectly competitive market.

One can use the economic way of thinking in approach to solving the problem of alcohol abuse. An economist could assume that people abuse alcohol because they are stressed. We could also assume that people drink alcohol to curb depression and forget about things. Economists use assumptions to make things simpler and focus attention on what really matters (Sullivan et all., 2012).

Economic analysis involves variables and how they affect one another (Sullivan et all., 2012). We can look at the price of alcohol and its effect on binge drinking. We could also look at an all-out ban on alcohol on college campuses and its effect on alcohol abuse.

“An economist often considers how a small change in one variable affects another variable and what impact that has on people’s decision making” (Sullivan et all., pg. 50, 2012). How would people respond to small changes in circumstances; this is called marginal change (Sullivan et all., 2012). Reducing the hours of operation of liquor stores would have a positive effect on binge drinking (Price, 2012). Clubs and bars making their last alcohol call earlier; would reduce the number of alcohol related injuries.

Rational people respond to...