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Microeconomics Week 2

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Lillian Kobusingye
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29 views2 pages

Microeconomics Week 2

Uploaded by

Lillian Kobusingye
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ZHEJIANG GONGSHANG UNIVERSITY

SCHOOL OF BUSINESS ADMINISTRATION

COURSE: MICROECONOMICS

STUDENT NAME: Lillian Kobusingye

NATIONALITY: UGANDAN

STUDENT NUMBER: 21010019014

WEEK TWO: The Market System and the


Circular Flow
ASSIGNMENT QUESTION
1. How does self-interest help achieve society’s economic goals? Why is there such a wide
variety of desired goods and services in a market system? In what way are entrepreneurs
and businesses at the helm of the economy but commanded by consumers?

Self-interest is the motivating force of the various economic units as they express their free
choices. Self-interest simply means that each economic unit tries to achieve its own particular
goal, which usually requires delivering something of value to others. Self-interest helps achieve
society's economic goals usually by delivering something of value to others. There is such a wide
variety of desired goods and goals because of freedom of choice. People are free to choose what
they want. Consumers have a demand for certain products and businesses have to meet those
demands in order to be successful.
Entrepreneurs try to maximize their profits; property owners want the highest price for their
resources; workers choose the job with the best wages, fringe benefits and working conditions.
Consumers apportion their expenditures to maximize their utility, while seeking the lowest
possible prices. As individuals express their free choice, the economy is directed to produce the
most wanted goods at the lowest possible cost.
Each individual consumer will choose a variety of goods and services that in combination will
maximize his/her satisfaction (utility). There is a wide variety because individual wants are
diverse. To maximize profits, producers must respond to the desires of the individual consumer.
Although producers are free to choose, what products they will produce, if the producers are to
maximize profits, these good and services must be what consumers’ desire. Entrepreneurs can
drive the economic ship where they want (at least for a while), but the ship will run aground
(businesses will fail) if entrepreneurs at the helm do not listen to the consumers’ demands. In
conclusion, the motive of self-interest gives direction and consistency to what might otherwise
be a chaotic economy.

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