PartI20101 - 1 Common Sense Economics: What Everyone Should...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Compliments of CommonSenseEconomics.com © 2010 Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini - St. Martin’s Press, © 2010) Reading Guide Part I. Twelve Key Elements of Economics Element 1: Incentives Matter. 1. The authors state that “All of economics rests on one simple principle.” What is this principle? 2. Describe the following statement in your own words: “There is little reason to believe that a person making choices in the voting booth will behave much differently than when making choices in the shopping mall.” 3. Do incentives influence the choices of students? Do incentives influence the decisions of elected political officials? Did incentives influence choices under the socialist central planning system of the former Soviet Union? Provide examples. 4. If you respond to changes in incentives, does this indicate that you are selfish and greedy? Did Mother Teresa respond to incentives? Was she selfish and greedy? 5. If the price of a good increases because consumers want to purchase more than sellers are currently supplying, how will the higher price affect the incentive of consumers to purchase the good? How will the higher price affect the incentive of sellers to supply the good? Element 2: There Is No Such Thing As a Free Lunch. 6. Why can’t we consume as much of each good or service as we would like? If we become richer in the future, do you think we will eventually be able to consume as much of everything as we would like? Why or why not?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Compliments of CommonSenseEconomics.com © 2010 7. What does the cost of a good or service reflect? Does it ever make sense to make a choice without considering the cost? If you choose an option without considering the cost, what does this mean? 8. Why is it costly for you to purchase and item or make choices involving the use of your time? What is the meaning of “opportunity cost”? What is the opportunity cost of purchasing a book? What is the opportunity cost of reading the book? 9. If a good is provided free of charge to individuals, how will this affect their incentive to conserve on its use? Element 3: Decisions Are Made at the Margin. 10. What does it mean to make a decision “at the margin”? Consider your purchases of food in the next month. As you choose how much you will spend on food and the amount of each food item you will purchase, will these be “marginal” decisions? Why or why not? 11. A restaurant offers an “all you can eat” lunch buffet for $10. Jim has already eaten three servings, and is trying to decide whether to go back for a fourth. Describe how Jim can use marginal analysis to make his decision. 12.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/12/2011 for the course ECON 1113 taught by Professor Staff during the Spring '11 term at Oklahoma State.

Page1 / 6

PartI20101 - 1 Common Sense Economics: What Everyone Should...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online