ProblemSet1_AK - Problem Set #1 ECON 200 B Clower Due...

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Problem Set #1 ECON 200 B Clower Due Friday April 9 th , 2010 Resource Utilization and the Science of Economics ANSWER KEY 1. List and explain fully the ten principles of economics. These are fully outlined in the course notes. Please review these for solution. 2. What is scarcity and why is it important in economics? Scarcity is defined as the problem of limited resources with which to meet unlimited wanted . At any moment in time, economic resources are limited, but over time the quantity of resources can change. As a result of limited resources and unlimited wants, we must choose among competing demands for the limited resources, so that we can fulfill our wants as best as we can. This is the economic problem that faces each individual, each family, each business, each society, and each nation - truly a universal problem. Economics can be defined as a social science that studies how to allocate scarce resources among competing uses. a) Give an example, related to economics, which demonstrates the concept of scarcity. One example of scarcity is the limited amount of time within a day that we each face. There are an unlimited number of ways with which to use that time. Each of us must economize when we choose what to do with the time in our day. b) Define opportunity cost and explain how it is related to scarcity. Is opportunity cost the same as monetary cost? Why or why not? The opportunity cost (or the real economic cost) of any product or service is measured by the value of the next best sacrificed alternative. Opportunity cost need not be assessed in monetary terms, but rather can be assessed in terms of anything that is of value to the person or persons doing the assessing. For example, a person who chooses to watch, or to
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This note was uploaded on 11/19/2010 for the course ECON ECON200 taught by Professor Ericka during the Spring '10 term at University of Washington.

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ProblemSet1_AK - Problem Set #1 ECON 200 B Clower Due...

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