Assignment:
Discuss the benefits and costs of unemployment benefits to the individual and to the economy
Costs to the economy
One of the effects of these benefits is that it increases government taxation especially on businesses. This is because as unemployment increases and its benefits increase too, the unemployed lot contributes less to government revenue in indirect taxes. To be able to continue giving these benefits, the government has to tax the businesses more to raise the revenue. Another effect of unemployment benefits is the increase in government borrowing. As a result of the increase in government spending and a decrease in revenue from taxation, the government is forced to borrow to meet its expenses.
Cost to individuals
These benefits subsidize unemployment and lead to chronic idleness. This idleness is dangerous to the individuals since it encourages them to stay out of work and just enjoy the benefits. Idleness can also bring social costs to the society, example, with the increase in the amount of free time, individuals engage in activities such as drug use during free time. This in turn impacts negatively on their health. Smoking as we know, causes cancer and can be lethal to both the smoker and to the people in his surroundings. In this state of idleness, their skills and experience become eroded and might lead to hysteresis unemployment. While receiving these benefits, the unemployed feel no pressure to search for jobs as they are assured of some income. Individuals therefore become dependent on state support and become less productive thereby impacting negatively to their personal growth and the long term growth of the economy.
Benefits to the economy
One of the benefits that unemployment benefits provide to the economy is that to a smaller percentage, it gives a boost to economic growth (Kotler & Armstrong, 2013). This is due to the fact that the dollars that are paid to the citizens are further spent on basic commodities. Every one dollar that is spent on unemployment benefit contributes US$ 1.64 toward the growth of the economy. This is achieved through the ripple effect, i.e. one dollar spent on purchases would not only pay for the goods but pays for the cashier's salary, the truckers and even the supplier.
Benefits to individuals
In case of a troubled economy, example the recess period, these benefits provide individuals with some income security as they still look for work. They are therefore shielded from experiencing the full impact of unemployment during the economically troubled periods (Froeb et al., 2014). The unemployment insurance is also an additional incentive to the workers that are laid off, this is because they can convert their savings to cash and use for the period that they are stuck.
A company could produce and sell any product as long as there is a market for it
The market for any product is determined by its aggregate demand, where demand is the quantity of that product that consumers are willing and able to buy at the current market price. It is this demand that stimulates production (Salvatore, 2011). Before venturing into the production of any product, the firm must carry out market research to determine its demand by examining the following factors:
• Consumers tastes and preferences
• The product price and the prices of other related goods, i.e. complements and supplements
• Consumers disposable income
• Expectations of future price changes
• The total market size
Before deciding on whether to produce the product or not, it is essential that the firm finds a product market fit for it. Though the presence of a market is the ultimate reason for a firm to venture into production, it must test the real value of the product to the market first to ensure that it is not a total failure (Kotler & Armstrong, 2013). The success of the product depends greatly on the level of demand it creates in the market. If research carried out shows that there is a sufficient level of demand or market for the product, the firm is advised to produce. In its production, the firm incurs costs which can be divided into variable and fixed costs. Variable costs refer to those costs that vary with production output while fixed costs are relatively constant. The price of the product must be set higher than the average costs of producing the goods. This way, the firm is able to make profits from its sales.
References
Froeb, L. M., McCann, B. T., Ward, M. R., & Shor, M. (2014). Managerial economics: A problem solving approach (3rd ed.). Mason, OH:South-Western Cengage Learning.
Kotler, P., & Armstrong, G. (2013). Principles of Marketing 15th Global Edition. Pearson.
Salvatore, D. (2011). Managerial economics in a global economy (7thed.). New York, NY: Oxford University Press.
Please you are only answering the 1 page paper to the bold questions.
Thanks Desmond! You made a good argument in support of how it is rational to propduce or sell a product as long as a market exists for it. What is your view on the production or sale of products or services that are illegal such as Cocaine? How would you advise a firm that argues that as long as there is demand for an item one can engage in its production or sale?
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