Question

The mayor of Gotham City, worried about a potential epidemic of deadly influenza this winter, asks an economic adviser the following series of questions. Determine whether a question requires the economic adviser to make a positive assessment or a normative assessment. a. How much vaccine will be in stock in the city by the end of November? b. If we offer to pay \(10 \%\) more per dose to the pharmaceutical companies providing the vaccines, will they provide additional doses? c. If there is a shortage of vaccine in the city, whom should we vaccinate first \(-\) the elderly or the very young? (Assume that a person from one group has an equal likelihood of dying from influenza as a person from the other group.) d. If the city charges \(\$ 25\) per shot, how many people will pay? e. If the city charges \(\$ 25\) per shot, it will make a profit of \(\$ 10\) per shot, money that can go to pay for inoculating poor people. Should the city engage in such a scheme?

Short answer

Answer: Positive assessment b. If we offer to pay 10% more per dose to the pharmaceutical companies providing the vaccines, will they provide additional doses? Answer: Positive assessment c. If there is a shortage of vaccine in the city, whom should we vaccinate first – the elderly or the very young? Answer: Normative assessment d. If the city charges $25 per shot, how many people will pay? Answer: Positive assessment e. If the city charges $25 per shot, it will make a profit of $10 per shot, money that can go to pay for inoculating poor people. Should the city engage in such a scheme? Answer: Normative assessment

Step-by-step solution

a. How much vaccine will be in stock in the city by the end of November?

This question seeks factual information about the available vaccine supply. Therefore, it requires a positive assessment.

b. If we offer to pay \(10 \%\) more per dose to the pharmaceutical companies providing the vaccines, will they provide additional doses?

This question is asking about the effect of increasing payments to pharmaceutical companies on vaccine supply. So, it needs a positive assessment to determine cause-and-effect relationships.

c. If there is a shortage of vaccine in the city, whom should we vaccinate first \(-\) the elderly or the very young?

This question involves making a decision based on values and priorities. Thus, it requires a normative assessment.

d. If the city charges \(\$ 25\) per shot, how many people will pay?

This question is looking for an estimation of demand based on pricing. Hence, it needs a positive assessment to establish a relationship between price and demand.

e. If the city charges \(\$ 25\) per shot, it will make a profit of \(\$ 10\) per shot, money that can go to pay for inoculating poor people. Should the city engage in such a scheme?

This question calls for evaluating the pros and cons of a proposed policy, which involves making a judgment based on values and beliefs. Therefore, it requires a normative assessment.

Key concepts

Economic Assessment

Economic assessments are evaluations of economic data, typically involving the use of facts and figures to make predictions or inform policy decisions. These assessments can be of two types: positive or normative. A positive assessment is based on objective statements that can be tested, such as determining the quantity of vaccines available. A normative assessment involves value-based opinions, such as deciding who should receive the limited vaccines first. Positive assessments are crucial for decision-making as they offer factual insights, allowing policymakers to understand the current economic conditions. Normative assessments help guide decisions where values and priorities play a crucial role, often regarding policy impacts on society. Both types complement each other to provide a comprehensive view of economic issues, ensuring that actions based on facts are also aligned with societal values.

Cause-and-Effect Relationships

Understanding cause-and-effect relationships is essential in economics for predicting outcomes of various decisions. For example, if Gotham City decides to increase payment for vaccines, will this persuade pharmaceutical companies to supply additional doses? This question is based on examining the causal link between price incentives and vaccine supply. Economists often use cause-and-effect analysis to forecast how changes in one aspect of the economy can affect others. Such analyses rely on positive assessments as they focus on factual linkages rather than value judgments. By examining these relationships, policymakers can implement targeted actions to achieve specific goals, such as increasing vaccine availability. Grasping these concepts ensures that economic policies are both effective and efficient.

Decision Making Based on Values

Decision-making in economics frequently involves normative assessments, where choices are influenced by societal values and ethical considerations. For instance, deciding whether to prioritize the vaccination of the elderly over the young during a shortage requires an understanding of what the community values more—protecting the elderly's experience and wisdom or safeguarding the young's potential and future. Normative economic questions often do not have clear right or wrong answers, as they depend on societal priorities and ethical standpoints. Understanding the value-driven decisions is key for students as these choices impact not just the economy but the society at large, shaping the future community landscape.

Factual Information

In economics, factual information is critical for forming positive assessments. These pieces of data help economists understand the current state of affairs, such as predicting how much vaccine will be available by a certain date. Having accurate facts enables decision-makers to devise realistic and effective policy measures. Economic data encompasses a wide range of elements such as supply levels, demand data, pricing, and profit margins. This information forms the backbone of economic modeling and policy formulation. Students should focus on distinguishing between factual and opinionated information, as this skill is vital for accurate economic analysis and understanding.

Price and Demand Relationship

The relationship between price and demand is a fundamental concept in economics. It explains how the quantity of a product demanded by consumers varies with changes in price. For instance, if Gotham City charges $25 per vaccine shot, analysts would aim to predict how many residents would be willing to pay this amount. This type of question calls for a positive assessment, as it requires factual estimation based on historical data and market behavior. Generally, there is an inverse relationship: as prices increase, demand tends to decrease, and vice versa, assuming all other factors remain constant. Understanding this relationship helps economists and policymakers forecast changes in consumer behavior and adjust policies to balance supply, demand, and pricing effectively. Grasping these dynamics is essential, as it allows students to comprehend how market adjustments can influence economic scenarios.