Wheelan Chapter 1

Wheelan Essay 1

For the first chapter, Wheelan discussed about how trade is important to everyone in one way or another, and how we, as consumers, always seek to maximize utility with what we have in our daily lives, giving one thing up for another option. Producers, on the other hand, seek to satisfy the market demand, or create a demand. One important thing he discussed was how everyone faces tradeoffs, and how we try to maximize utility with the limited resources we have. The market plays a huge part of our everyday trading activities, and this market is created by our needs and wants, and people supplying that demand. In this aspect, almost always, both parties, the consumer and producer, benefits from trade.

In the following chapter, Wheelan discussed about how people respond to incentives, and how incentives affect their decisions. Logically, people choose options that would benefit them the most, or with the least risk or cost, or a combination of both benefits and costs. However, in the chapter, Wheelan did bring up that not all incentives bring about a positive effect. One example would be the Medicare system which does not encourage people to save up for their own retirement, and rely on the government to provide for them at their old age. In this second chapter, the author also discussed about how capitalism and competition has become an incentive for people to continually improve themselves to be ahead of the race, rather than to be crushed or left behind. This continuous rat race has contributed to the advancement in technology and the improvements in our goods and services today.

In the first chapter, Wheelan argued that trade, in the long run, makes everyone better off, which is also Mankiw's fifth principle. True, Paris has benefitted from trade, from a country who does not produce anything to one which has food and products readily available for its people's needs. But trade does not always benefit one, especially on the long run. In one of the paragraphs, Wheelan pointed out an assumption that individuals act to make themselves as well off as possible. Truly, with the example he brought up about South Americans chopping trees from a rain forest, and how it destroys the ecosystem, he brought up an important point, that people who are unable to provide enough for themselves, often do not think about the consequences in the long run, but worry about the immediate effects of their decisions instead - to make themselves as well off as possible.

However, trade does improve the lives of many, even if only in comparison with their own past, rather than those they trade with, contradicting the assumption that trade makes everyone