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TUTORIAL 1 WEEK 2 INTRODUCTION TO THE TUTORIAL PROGRAM THINKING AS AN ECONOMIST Reading Text: Ch 1 Review Questions: 1, 2, 3, 4, 5, 6 and 7 1. They probably mean that, given the competing demands on their limited resources, there are other things (a holiday, private school fees, a new computer) that they choose to spend their income on rather than a plasma screen television. 2 Your friend probably means that your tennis game will improve faster if you take individual lessons instead of group lessons. However, individual lessons are also more costly than group lessons, so those people who are less concerned about how rapidly they improve may do better to take group lessons and spend what they save on other things that they value more. 3 False. The size of your monthly electricity bill should not matter in this case, assuming ceteris paribus. For the same effort, a $10 saving on your monthly bill should be equally attractive in both cases. The fact that a $10 saving will be a larger percentage saving on a small bill than on a large one is irrelevant. As the rules of rational decision making suggest, it is absolute changes in costs and benefits that matter, not proportional changes. 4 Because the price of a movie ticket is a cost the patron must pay explicitly, it tends to be more noticeable than the money that she would fail to earn by seeing the movie. As Sherlock Holmes recognised, it’s easier to notice that a dog has barked than that it has failed to bark. 5
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This note was uploaded on 07/30/2011 for the course ECON 1101 taught by Professor Julia during the Three '08 term at University of New South Wales.

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