You are viewing a single comment's thread from:

RE: Opportunity Cost and Regulations

in #government2 years ago

I agree with a lot of what you had to say. It is up to the entrepreneur to know the needs of his/her customers better than they know their own needs and better than the competition knows their needs. This can be done through market research but also through effectual reasoning and problem solving. If done successfully, the entrepreneur can create a product that is valued highly by consumers so demand increases and everyone ends up happy. The entrepreneur gets the money, and the consumer gets a product that they value more than the money they spent.
I also enjoyed your summary of the shoemaker’s window. This story is a great example of the ripple effect.

“On a larger scale, these choices influence more than the parties directly involved. With the window shopper, by purchasing a replacement window, not only is the consumer happy with his restored boutique shop, but additionally, the distribution unit is pleased they gained another customer/ potential referral. This economic activity also boosts the status of the economy”

When the shoemaker’s son breaks the window, the shoemaker has to decide if replacing a window is worth the cost which would be money that he could use to buy more resources and in turn sell more product. This decision has further ramifications than that though. If the shoemaker decides not to get the window replaced, the glazier might not get any work and go home with no money to spend on his own. If he does decide to replace the window, the glazier may take the money he gets from the project and put it back into the local economy. This is a great example of the seen and the unseen. The seen is the son breaking the window, but the unseen is the decisions made after that and how that impacts the local economy. The son breaking the window started a ripple effect that seemed like a bad situation but ended up stimulating the local economy.

Government regulation seems to have unintended effects. If we were to look at a certain regulation in a vacuum, like when government is trying to stimulate a certain industry, they may be effective. Unfortunately, real life doesn’t happen in a vacuum. The seen is the government adding a regulation or a tax in a given area, while the unseen is everything else down the chain that that action causes. This is another great example of the ripple effect and how businesses are indirectly affected by the actions of the government, causing them to pivot and sometimes shut down depending on the severity of the situation.