Chapter 2: Q8 (page 43)
Explain why scarcity leads to tradeoffs.
Scarcity ie supply shortage compared to demand, and resources alternative uses - lead to the problem of economic choice & hence trade offs.
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During the Second World War, Germany’s
factories were decimated. It also suffered many human
casualties, both soldiers and civilians. How did the war
affect Germany’s production possibilities curve?
Do economists have any particular expertise at making normative arguments? In other words, they have expertise at making positive statements (i.e., what will happen) about some economic policy, for example, but
do they have special expertise to judge whether or not
the policy should be undertaken?
What assumptions about the economy must be true for the invisible hand to work? To what extent are those assumptions valid in the real world?
Suppose Alphonso’s town raised the price of bus tickets to \(1 per trip (while the price of burgers stayed at \)2 and his budget remained $10 per week.) Draw Alphonso’s new budget constraint. What happens to the opportunity cost of bus tickets?
Is the economic model of decision-making intended as a literal description of how individuals, firms, and the governments actually make decisions?
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