Reference no: EM133200027

Assignment:

A market economy works by using the forces of supply and demand to determine the appropriate prices and quantities for most goods and services in the economy (Market Economy, 2020). Businesses are given the freedom to pursue profits by creating outputs that are more valuable than their inputs, and they are also free to fail and go out of business if they do not. Because of this, there are ways business can contribute to the efficiency of a market economy in ways that independent contractors cannot. With the limited role of government in a market economy, there is an increase in competition amongst firms (Green, 2021). Because businesses compete with one another, they must determine ways to have a competitive advantage over their rivals.

This leads to increased efficiency in the economy by firms figuring out how to reduce prices, improve their good or service, and achieve a higher number of sales. Another way firms contribute to the efficiency of a market economy is by hiring employees rather than a network of independent contractors. Ronald Coase describes the differences between agents and servants (contractors and employees) as one having direction while the other having the freedom to carry out their work (Coase, 1937). Firms have two options, they can either hire an employee to do the work, in which case they can control and manage how it is accomplished, or they can hire an independent contractor where they must trust it will get done in the contracted time. Since there is not a strong tie between the market economy and independent contractors, mainly because there is no incentive to manage prices or products due to lack of competition, firms are thus able to contribute more to the market economy.

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The organization I work for is a retail business that imports packaging materials from India and sell them to customers in the United States and Mexico. In my current job, we do receive the materials and deliver among many other things but we also need help from outside individual contractors when it comes to drop shipping certain items or for the freight on our importations. Firms contribute to the efficiency of the market economy in ways that networks of independent contractors do not because firms play a critical role in the economy because they provide service therefore this contributes to the economy's cyclical evolution. When thinking about a firm this brings stability and power. Firms have a frame of teamwork where they hire employees and pay them for their work.

This contributes to the progression of income in families, which is later spent on other businesses and the economy continues to move that income "Firms employ different sets of production. This includes employing workers (labor) to produce goods and services. By employing labor, firms pay wages creating a flow of income to households, which ultimately can be spent by households on goods produced by different firms" (Economicshelp, 2022). Firms will also contribute to the economy by wanting to stay in competitive advantage with their competitors this being because firms will be encouraged to produce more and efficient goods & services and will also seek to make the most use of capital and labor.

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As soon as we wake up, we use several decision-making processes to decide what to wear, how to get to work, and even when to make arrangements with friends. Making decisions is described as "the process of defining the problem, identifying the alternatives, determining the criteria, evaluating the alternatives, and choosing an alternative." (Anderson et al., 2015) The four fundamental models of decision-making are rationality, bounded rationality, intuition, and creativity. These vary depending on the amount of knowledge or drive a decision-maker has to make a choice.

(Management Principles, 2022) I typically utilize the rational approach when deciding what to eat for dinner, taking into account all the factors such as time, money/cost (make dinner/ go out/ eat leftovers), type of food (Mexican, Asian, American), and previous meal. You eventually learn to create this decision tree in your head and select the best option based on various circumstances. The following stage is to create many top selections, then evaluate the alternatives and choose the best option you have come up with.

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I often use a decision tree approach in order to determine how I will go about my day and it entails three main sections that are as follows: work, school, and personal. I selected the model based on its effectiveness in accounting for potential benefits and forfeitures that may transpire from the decision(s). As mentioned in Anderson et al. (2016), decision trees show the natural or logical progression that will/may occur over time. With this being said, I am constantly weighing outcomes and the associated costs of which, even though it may not be a monetary factor. Some days I may have time to focus on school because am caught up at work, and other days may allow me to focus on both work and school because all of my personal errands are complete. Through proper planning and analyzing, great decisions can be made that ultimately lead to efficiency and positive results.