ECONOMICS 1

Principles of Economics

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Problem 1. Fairness

In my society, there is some fairness especially in employee-employer relationship.

Substantial fairness exists at the work place where the employer treats the employee in a fair

manner through minimizing the forceful powers and letting each person work efficiently. This

means there is justice practiced among people. In addition, people in my society who are sickly

require more income to achieve similar happiness with those whose lives are perfectly in good

conditions (Leeson, 2011). This shows there is substantive fairness. Furthermore, the agreement

would be considered efficient in case different parties in the society have hustled or bargained

for even distributions and resolutions of fairness. More so, the fairness about substances review

is likely to elaborative using distributional without the need of theories of efficiency. This is

because the fairness criterion is gauged by the division of contractual gains in the equitable

approach in the society. Most significant is that, the norms that specify the influence of

bargaining gains in the society that are divided should be increased depending in the size of

gains.

On the other side, procedural fairness needs decisions to be made in a consistent manner.

In most cases, procedural fairness is based on facts (rational) and there is no bias especially

during the process of decision-making. In our society, there is no procedural fairness since

economic equality does not exist. There is a lot of discrimination in the society, the wealthier

take advantage of the poor in terms of financial status.

Problem 2: If Bruno can impose the allocation with force

By using his forceful means, Bruno is free to select within the technically feasible area

around the provided allocation. Basing on his perception, Bruno explains that irrespective of any
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number of hours he commands Angela to work, the amount of grains she will produce will be

equivalent to the area of the feasible frontier (Guerci & Norto, 2018). However, he claims he

should provide her with an amount that is more that the biological survival constraint shown for

all that hard effort applied in order to continue exploiting her. Bruno should be able to

differentiate between what Bruno pays to Angela and the amount she produces. To achieve all

this, Bruno must know the actual hours that Angela works and this is distance between the

vertical frontier and the constraint of the biological survival on the vertical axis on figure 5.5.

After the application of this strategy, the total amount Bruno earns become his ‘economic

rent’. This implies that the amount he would have earned in case Angela was not his slave would

be set as zero in the model. Bruno therefore should first allow Angela work for 8 hours per day

to produce 9 bushels as she used to produce when she had land. Angela requires 3.5 bushels of

grain within eight hours to have a living. This force Bruno to have 5.5 bushels by not threatening

or influencing his future chances of gaining from Angela’s labor force. However, if Bruno forces

Angela to work for more hours, she will need little grain to gain energy of working for those

additional hours. This is because there is some flatness at the eight working hours as it is

observed at the biological survival constraint (Guerci, & Norto, 2018). On the other side, the

feasible frontier is steeper and this means she will be able to produce more if more hours are

added to her. This is observed on the right of the 13 hours where the ‘biological survival

constraint is flatter than the feasible frontier’ thus MRS < MRT (Guerci, & Norto, 2018).

Problem 3: Technological Progress

Figure 1: Technological Change about Two Individuals

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Where point D is the Pareto efficiency

Figure above shows the change brought about the advancement of technology between

two individuals that is Bruno and Angela. By borrowing the knowledge of Pareto efficiency, it is

believed that the success of one individual does not make another one in question worse off.

Therefore, the change makes the individual better off to. According to the graph above, when the

technology advances, both individuals shall increase in their level of output reaching to point D.

this therefore shows that as technology advancement changes, individuals increase on their levels

of output that in turn makes them better off in the entire society.

Problem 4. Biological and Economic Feasibility

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By shifting the points that are bounded with the indifference curves’ reservation, the

efficient frontier is likely to allocate all bushel grains economically. Besides, if the curves are

shifted t the right beyond the Pareto optimality point, the possible mutual output shows the

reason as to why the change should be put at the apex. However, such point can be motivated

since both Angela and Bruno have a will of becoming better off. It is evident that when Angela

reduces hours of free time, many Bushels are to be attained. This is because when the resting

hours are minimized, this maximizes the time for work. The increased hours for work shift the

point of efficiency outwards to reach on the Pareto optimality. Therefore, for each and every

feasible points about the dominance of Pareto, such allocations would appear without any deal

between two individuals (Leeson, 2011). On the other hand, it is not guaranteed that both Angela

and Bruno shall benefit in distributed way or equally manner. However, both parties are entitled

to achieving Pareto improvement due to the shift in curves about the hours for free time and the

output for bushels. For instance, if the authorized institutions such as government offer Bruno the
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authority to initiate a take it or leave-it situation in relation to the agreement for Angela, he is

able to capture all the available grains.

Problem 5: Why a point on the biological survival constraint is higher (more grain

is required) when Angela has fewer hours of free time. Why does the curve also get steeper

when she works more?

Critically observing figure 5.6, the biological survival constraint is higher yet the hours

Angela works are few and this means that in case she limits free time by working more hours,

she will need more energy to work. To gain that extra energy, Angela requires more food and

this forces the curve to become higher and steeper when she has free less time and thus forming

the biological survival constraint (Frutic, 2015).

Why the biologically feasible set is not equal to the economically feasible set

The more Angela works, the lesser her hours of being free reduce. Therefore to reduce on

the free time, she has to work more but extra effort means she should have more grains to

consume. The biological constraint thus needs Angela one to have some time to rest from work

(Frutic, 2015). On the other hand, economic feasibility requires on to work more hours so as to

live a better standard. This makes the difference between the biological feasible set and

economically feasible set as shown ion figure 5.6.

Problem 6. The rules of the game

The introduction of voluntary transactions and government unemployment benefits

changes the interaction nature between Bruno and Angela in the following ways.
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It is believed that Bruno and Angela are likely to gain confidence. With the continuous

voluntary benefits on the market, various companies and other firms producing goods can be

eager in selling them to people. This can at times make them worried in deciding to take the right

choices. With the work plans for Bruno and Angela being given at their workplaces, they

understand that their customers are vetted with available benefits (Roser & Ritchie, 2017). It is

observed that the voluntary benefits gives financial outcomes regardless of the workers’

insurance coverage as well as the government support over the unemployed.

Furthermore, there exists a change of wide range of available options in order to allow

employees to attain voluntary benefits for suiting their own lifestyles and normal circumstances.

Besides, various government unemployment benefits and voluntary benefits are considered as

portable. This implies that in case employees are able to change the jobs, they would still remain

with the coverage as soon as they have paid premiums which in turn gives the voluntary plans

very easy to be appealed and administered (Roser & Ritchie, 2017). More so, government

unemployment opportunities and voluntary benefits can complement on the offerings of life

insurance. It is evident that if the entrepreneur gives a broader voluntary offering, the workers

can adopt to work very hard due to the coverage of marginal voluntary benefits. It is also

believed that voluntary transactions can provide the net safety in terms of finances that help the

workers with the expenses that are catered for by other resources for production. Most important

is that there is affordability of Bruno and Angela to produce at less expensive resources in case

they are purchased through the entrepreneurs. This is because of the voluntary transactions that

make the two not to be worried of the bank drafts or premium payment worries since they are not

available. With the government unemployment and voluntary benefits, Bruno and Angela save

more of their money that in turn helps them to produce more in their grains or output. Most
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significant is that is the voluntary transaction are paid to Bruno and Angela directly, a lot of

money can be used where it is needed.

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References

Frutic, B. 2015. Including Risk in Economic Feasibility Analysis: A Stochastic Simulation Model

For Blueberry Investment Decisions In Chile. Retrieved from:

http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0100-29452015000400870

Guerci, M.J & Norto, W.G. 2018. Economic feasibility of an augmentative biological control

industry. Journal of Crop Protection, Volume 110, Pages 34-40. Retrieved from:

https://www.sciencedirect.com/science/article/pii/S0261219418300814

Leeson, P.T. 2011. ‘An-arrgh-chy: The Law and Economics of Pirate Organizations’. Journal of

Political Economy 115 (6): pp. 1049–94. Retrieved from:

https://www.core-econ.org/espp/book/text/05.html

Roser, M. & Ritchie, H. 2017. Technological Progress. Retrieved from:

https://ourworldindata.org/technological-progress