Application of Economic Principles: Opportunity Cost and Trade (Article Sample)

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Application of Economic Principles: Opportunity Cost and Trade
Microeconomics is a branch of economy that studies how businesses and individuals can best use the limited resources available to them. On the other hand, macroeconomics studies the bigger aggregate economy and both (microeconomics and macroeconomics) make up the main economic branches. So how do economic principles affect our daily lives? It requires making choices or calculated decisions on the limited available resources and amount of time to result in the best outcomes that can maximize individual satisfaction. In this light, Zimmerman of the Wall Street Journal News argues that the Trans-Pacific Partnership (TPP) is necessary to the interests of the U.S and without it, America will lose out. Furthermore, the newly President-elect Donald Trump has opposed the TPP, and this will most likely harm the strategic and economic interests of the country. In a nutshell, the news article by Zimmerman argues that the stakes for the economy of the U.S are higher and American products and companies are at risk of being shut out in Asia as Chinese and Japanese firms are becoming dominant regionally unless the Trump administration reconsiders joining the TPP. From this perspective, this paper will analyze this news article using the two economic principles of opportunity cost and trade.
Principle 2: Opportunity Cost
Opportunity cost identifies the need to attain what you want or goals by giving up what you necessary do not want. From a formal definition, it is the cost of the best choice that is available to someone out of other many options available. There is a strategic importance of the U.S-Japan alliance under the Trans-Pacific Partnership agreement. The U.S does not have other competing options available when it comes to trading with a country such as Japan, so the available option remains to sign this 12-nation agreement. But what are the opportunities or benefits America stands to acquire? According to Zimmerman, a survey was performed on the tactical significance of TPP to the nations and 90% of respondents indicated that TPP would allow the U.S to influence trade with China effectively. Additionally, the partnership will enable America set-up a high standard investment treaty with China. Furthermore, the World Bank has estimated tremendous growth in the economies of the countries with the U.S expected to boost GDP by 0.5% which amounts to $131 billion annually. Former President Obama supported the TPP agreement, and it was his biggest economic priority of 2016. However, it faced some major oppositions from the likes of Donald Trump and Ted Cruz. Most importantly, delaying the TPP for even a single year would amount to $77 billion opportunity cost to the American economy.
Principle 5: Trade Makes Everyone Better off
As the name suggests, this principle highlights the economic significance of trade among individuals and countries. Trade between countries has existed for many years. It is an economic principle that reflects daily in our lives. International trade allows countries such as the U.S, Japan, and China to trade for products...