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Supply and Demand Model Research Paper

Economics is a vast subject that attempts to explain different occurrences in the world. Understanding the different problems affecting the growth and development of many countries requires individuals to engage in research activities, which highlight various issues that are responsible for the actual outcomes. From this perspective, different economic models have been developed to address the many results that are captured in different economic activities taking place across the globe. Importantly, employment and wealth creation play an essential role in strengthening the economy of a nation because of their ability to improve the overall lifestyles of individuals. Besides, the economic aspects create an enabling environment for governments to eradicate poverty, which derail any plans that have been developed to improve growth among other outcomes.

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In this regard, the classical model of supply and demand for the labor function enables corporations to enhance their production aspects to realize their objectives in the corporate world. In the labor market, production is an essential aspect because of its impact on the overall performance of an organization. Therefore, labor is a variable input that can be modified according to the changes taking place in the business environment to realize any set objectives of an organization.

Classical Model of Labor
In the medieval world, employment was regarded as a prestigious economic aspect that distinguished individuals from their peers in the community. During this period, economists argued that work could be easily accessed because of the different elements that take place in the business environment. At any given time, consumers will be purchasing various items from a distributor, a move that creates employment opportunities for different individuals in the supply and demand chain. In line with this argument, the medieval scholars argued that it was possible for the economy to provide full employment, an opinion that can be easily disputed by modern economists because of the various disruptions that can occur in the market. Unlike today, many individuals relied heavily on physical input to accomplish their tasks in the business environment. New employees had to be trained how to use different appliances to improve the operational performance of an organization. For this reason, previous economies would offer full employment because of the workforce required to execute various tasks in the workplace.

Nonetheless, modern economies have integrated their systems with technological advancements, a move that has phased out roles that were occupied by different employees in the work environment. Currently, one individual can hold more than five employment opportunities because of his or her ability to operate a machine singlehandedly. In the same vein, rigidity in the global wage structure has significantly influenced the ability of organizations to sustain many employees because of their ability to cut costs by embracing technology. A free market can easily be disrupted, leading to the closure of related corporations. From this perspective, unemployment is caused by the ability of external factors to interfere with normal operations of corporations in the business environment. When every person wishes to be employed, many people will accept lower wages to sustain their lifestyles. By creating a rugged work environment, the quality of labor may be affected because of the willingness of individuals to take any wage amount.

One of the significant assumptions associated with the classical model is the concept of full employment, which is triggered by many activities occurring in the business environment. From this realization, the corporate world cannot avail employment opportunities to individuals because of the different objectives that determine the operational performance of a corporation in the business environment. By assuming that wages will rise when the economy is at its best, the classical model became popular before the Great Depression. Many people were hopeful of the good times that would accrue because of the promising nature associated with a growing economy. However, failing to factor in external forces that can disrupt the economy exposed individuals to a series of problems, which affected their ability to overcome challenges in the business environment. Even though the economy is not self-correcting, economists should guide corporations in the process of making informed decisions that demonstrate the ability of a corporation to accomplish its desired objectives.

According to the classical theory, money has an insignificant impact on the overall performance of the economy. Instead, the model posits that the economy can be affected by labor, capital stock, and technology. On the same note, consumer’s financial discipline and saving culture can significantly disrupt the economy because of their purchasing power, which shapes economic conversations and decisions. On their part, investors review and evaluate different financial aspects before directing their funds to a specific project. By observing the returns on investment, which can accrue from their projects, investors can make competent decisions in the business environment. From this realization, economists believe that money only acts as a conduit of exchange, which facilitates different activities in the business environment. Many medieval scholars argue that if competition is highly encouraged in the business environment, many organizations will succeed in their attempts because of their ability to execute different tasks simultaneously.

The Keynesian Model
Understanding total spending might be an impossible task because of the dynamic consumer behavior that hinders government entities from realizing their set objectives. However, using the Keynesian model enables government institutions to identify the total spending of a country by evaluating different aspects, such as output and inflation. From this realization, total expenditure is marked as aggregate demand, where the oversight body estimates its impact on fiscal matters as output and inflation. Importantly, individuals should understand how the economy works before engaging the Keynesian model because of the technical procedures that interfere with its overall functions and performance. For instance, spending is affected by the tax policy, which may discourage or encourage consumers to exercise their spending powers on a wide range of commodities in the business environment. Previously, proponents of the Keynesian model argued that it was impossible for the different monetary policies to influence the aggregate demand. However, the changing economic times have presented a different outlook that compels individuals to visualize the various fiscal aspects from a particular perspective. Hence, aligning the interests of a government entity with those of the public enables a country to progress and accomplish its desired milestones in the global business environment.

If the prices of different products and services are rigid, then monetary policies can have a significant impact on labor and output. On many occasions, individuals are expected to develop numerous arguments that address different aspects of interactions that influence outcomes of events in their immediate environment. However, using the Keynesian model displays various assumptions that compel individuals to visualize events from a fixed perspective. Importantly, introducing new money through loans procured by financial institutions enables corporations to discover their company goals. Eliminating the price rigidity of different commodities allows individuals to realize real opportunities that can be explored. Importantly, governments should explore various approaches that can be used to improve the outcomes of events because of their impact on a wide range of concepts in the business environment. Demand and supply are affected by prices because of the changes in consumer behavior concerning specific products. For this reason, any fluctuations caused by external factors can create unemployment and decrease the output of corporations in the market because of different issues affecting individuals in their immediate environment.

Changes in demand and supply for different products and services can be triggered by macro-economic factors, which compel corporations to introduce stringent measures to control the cost of production. Organizations explore a wide range of approaches to discover their potential to make profits. From this realization, the Keynesian model argues that it might be impossible for an organization to control its wage policy if demand for their products is high. In the same vein, prices are slow when responding to changes in demand and supply. It is widely believed that demand for different products is controlled by the consumers. However, corporations can increase demand for their commodities by modifying their supply chain, a move that exposes a company to widespread risks in its immediate environment. Therefore, company managers should invest in research activities to discover different avenues that can be used to increase the productivity of their organizations.

Keynesian economics rely on existing government policies to oversee the management of aggregate demand, especially when developing viable solutions that can be used to overcome financial problems in the business environment. After the Great Depression, many individuals were keen to develop ideas that could be used to eliminate any probability of experiencing a similar financial shortcoming. Even though economists advised the public to manage their funds, the government was required to improve its uptake of information that can salvage the economy. By criticizing the classical theory arguments that the economy has a way of self-healing, Keynesian economists identified numerous incentives that would hasten the growth and stability of the U.S. economy. In this regard, the Keynesian model recommends governments to have an active fiscal policy, which creates employment and encourages wealth creation. Keynes criticized the concept of the economy returning to a state of equilibrium after an external attack because of the potential measures that could be used to overcome different elements affecting individuals in their immediate environment. Hence, individuals should not save their money because of its impact on the economy.

Labor is a variable input that can be modified according to the changes taking place in the business environment to realize any set objectives of an organization. According to the classical model, the economy has a self-healing technique that balances different aspects affected by a financial crisis. In this regard, individuals should understand the impact of external factors such as technology on the performance of the economy, especially when affected by external factors. From this realization, the Keynes model is an improvement of the classical model as it offers powerful insights that can be used by corporations to eliminate the risks of making wrong assumptions about the economy. Excess saving was an aspect that contributed to the Great Depression because of the inability of government entities to implement proposed fiscal policies. Thus, it is impossible for an economy to achieve a state of equilibrium if the government fails to introduce various regulatory measures to monitor its growth and development.

Colson, Abigail R., and Roger M. Cooke. “Expert elicitation: using the classical model to validate experts’ judgments.” Review of Environmental Economics and Policy 12, no. 1 (2018): 113-132.
Galí, Jordi. “The state of New Keynesian Economics: A partial assessment.” Journal of Economic Perspectives 32.3 (2018): 87-112.

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