Class_1_worksheet - relaxation(immediate benefit less...

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Economics 101 P. Conway, Fall 2011 In-class worksheet, Class 1 1. The Scarcity Principle states that although we have boundless needs and wants, the resources available to us are limited . Having more of one thing usually means having less of another. Suppose there is a Free Movie tonight for first-year students at Connor Beach. Does the Scarcity Principle apply to this Free Movie? Explain. Provider stdpt: Limited beach space Limited budget Student stdpt: Limited time to do other things 2. The Cost-Benefit Principle states that an individual should take an action if and only if the extra benefits from taking the action are greater than the extra costs. Marginal = Extra You and your suite-mates at Carolina are considering whether to drive to Wrightsville Beach for Labor Day. Would you use the cost-benefit principle to make your decision? If so, how? If not, why not? Yes. You would weigh the benefits and costs… Benefits:
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Unformatted text preview: relaxation (immediate benefit, less stress upon return), build relationships, fun Costs: monetary cost (gas, food, place to stay, entertainment) opportunity cost – value of what you might give up (ex. Party in chapel hill, football game, studying, etc.) Once you are there, you are debating whether to stay an additional day. Does your analysis change? 3. The Incentive Principle states that a person is more likely to take an action if the benefit of the action rises, and less likely to take an action if the cost of the action rises. Suppose that you learned last week that “Eating Animals” (the Summer Reading Program book) will also be a required reading for your English course. Are you more or less likely to read the book? More likely because you now have a bigger incentive to read it. Is this an application of the Incentive Principle? Why or why not? Yes. Yada yada yada....
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Class_1_worksheet - relaxation(immediate benefit less...

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