econ 2030 exam 1

econ 2030 exam 1 - Economics 2030 A The Basics 1 Economics...

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

View Full Document Right Arrow Icon
Economics 2030 8/23/10 A. The Basics 1. Economics and Economies a. Definition i. every decision made in life is made in scarcity ii. the study of how societies provision themselves with the material means of existence What? How? For whom? Consequences? b. Markets i. although a market can be a physical place, it usually refers to a pattern of human behavior involving the exchange of goods and services for money (social interaction) c. Microeconomics i. looks at decisions of individual buyers, sellers, and producers d. Macroeconomics i. looks at how economic decisions affect society as a whole 8/25/10 – Practice problems Ch 1: 6-12, 16-18, 21; Ch 2: 1,2, 4-8, 10 A. Economic Reasoning 1. Opportunity Cost a. the next best thing one gives up when making a decision b. this can be monetary or non-monetary 2. The Margin a. marginal decisions are small, incremental decisions rather than yes/no propositions line one goes up to 3. Rationality a. when faced with two options when someone has to make a choice, we assume the person will choose the decision that is best for them at the time the decision must be made b. this means an option that is at least as good as the opportunity cost (or better) c. in the case that the two options are equal, either decision is considered rational d. determining accurately what the relevant benefits and costs are is important B. Examples of Economic Reasoning 1. Bibi the Tutor, parts 1 and 2 a. Case 1 i. Bibi decides to hold tutoring sessions on Saturday evenings to supplement her income. She works on Saturday and charges $30 an hour. She sees a ticket for her favorite band on Ticketmaster and buys it for $60. She forgets about the concert and schedules a 2-hour tutoring session. She then remembers the concert on the day of. ii. She cannot reschedule the tutoring session, but she won’t be fired. Also, transportations costs are equal between tutoring/concert. iii. Benefits: $60
Image of page 1

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

View Full Document Right Arrow Icon
iv. Costs: perceived pleasure v. price of ticket is not a relevant cost because Bibi already paid for it i. this is known as a sunk cost vi. if rational Bibi’s decision is based on her value of perceived pleasure i. is it worth more or less than $60? b. Case 2 vii. in another case, Bibi hears about the concert at the last minute viii. Benefits: $60 ix. Costs: -$60 ticket, perceived pleasure x. now, if the perceived pleasure is less than $120, she will tutor xi. we can predict choice 2 if she chose to tutor in case 1, but not vice versa 2. Stasia and the Smorgasbord a. Case 1 i. In Copenhagen, Denmark, Charles and three friends find themselves hungry and with little money. They find one affordable all you can eat buffet for $8 a person. They decide to eat. ii. the $8 have been spent, and are therefore a sunk cost. The decision now has to do with when to stop eating. iii. After all others are finished eating; Stasia continues to eat, insisting on “getting her money’s worth”. She eats until she is sick.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern