Modern Principles of Economics (1)
The opportunity cost of winning a free ticket to the Super Bowl worth $950 and attending the game is
at least $950; the lost market value of selling the ticket and the time to go
Why do you think goods are sometimes marked in prices that end in 9 ($29.99 instead of $30)
1. Consumers respond to incentives (they believe they are saving money because the product appears cheaper) 2. A sales strategy that makes people think they are saving money
In an effort to clean the air, many communities impose restrictions on the burning of garbage. This policy causes more garbage to be buried underground, potentially increasing groundwater contamination. What concept does this example represent?
A trade off
Drug Loss
Because of the hire cost of testing a drug, fewer drugs are made and more lives are lost
Invisible Hand
Behavior based on self-interest can lead to an overall benefit to society
Booms and Busts
Fluctuations in economic activity over time
Imposing the death penalty on rapists may increase the number of murders, because
Once a victim is raped there is no additional penalty imposed for also killing the victim
A dependable legal system and competitive, open markets help to
Shape incentives that induce economic growth
Adam Smith's insight into market behavior
Society benefits when people and firms pursue their own self interests
Positive Relationship between the unemployment rate and college enrollment rate
The OC of going of attending college falls during the recession, leading to higher enrollment rates
When deciding whether or not to undertake an activity, economists compare
The additional cost of the activity against the additional benefits received
Opportunity Cost
The value of the next best option
Wealthy Countries
Wealthy countries tend to have a lot of physical capital per worker and a lot of human capital per worker
Drug Lag
when lives are lost because safe drugs that are still in the testing stage have not yet been approved