Chapter 1: Q. 1.1 (page 1)
Discuss the difference between microeconomics and macroeconomics.
Microeconomics is the study of the individual.
Macroeconomics is the study of the economy as a whole.
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Recently, a bank was trying to decide what fee to charge for “expedited payments”—payments that the bank would transmit extra-speedily to enable customers to avoid late fees on cable TV bills, electric bills, and the like. To try to determine what fee customers were willing to pay for expedited payments, the bank conducted a survey. It was able to determine that many of the people surveyed already paid fees for expedited payment services that exceeded the maximum fees that they said they were willing to pay. How does the bank’s finding relate to economists’ traditional focus on what people do, rather than what they say they will do?
In what way do small talk and gossip represent the use of simplifying assumptions?
Review Figure, and then state whether each of the following paired observations is on, above, or below the x-axis and on, to the left of, or to the right of the y axis.
a. (-10, 4)
b. (20, -2)
c. (10, 0)
Does the phrase “unlimited wants and limited resources” apply to both a low-income household and a middle-income household? Can the same phrase be applied to a very high-income household?
Explain, in your own words, the rationality assumption, and contrast it with the assumption of bounded rationality proposed by adherents of behavioral economics.
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