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Chapter 1: Q 15 (page 16)

Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated.
(a) Increased demand for laptop computers will drive up their price.
(b) Falling gasoline prices will result in additional vacation travel.
(c) A reduction of income tax rates will result in more people working.

Short Answer

Expert verified

(a) Increase in supply will lead to the downfall of the price.

(b) Increase in price of cars.

(c) Decrease in the value of money due to inflation.

Step by step solution

01

Step 1. Positive or Normative Analysis.

Positive analysis refers to descriptive facts and statements whereas Normative analysis is based on the judgments of economic policies.

02

Step 2. The other factor.

(a) The other determinant that can offset the stated outcome is the increase in supply which will lead to the downfall in prices.

(b) The other determinant that can offset the stated outcome is the increase in the prices of cars.

(c) The other determinant that can offset the stated outcome is the decrease in the value of money due to inflation.

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Most popular questions from this chapter

For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:

(a) To make predictions about how many apps a person will download onto her tablet device, an economist presumes that the individual faces limitations that make it impossible for her to examine every possible choice among relevant apps.

(b) In evaluating the price that an individual will be willing to pay for a given quantity of a particular type of healthcare service, a researcher assumes that the person considers all relevant health care options in pursuit of his own long-term satisfaction with resulting health outcomes.

(c) To determine the amount of time that a person will decide to devote to watching online videos each week, an economist makes the assumption that the individual will feel overwhelmed by the sheer volume of videos available online and will respond by using a rule of thumb.

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