Econ 1 Assignment #1b Week 1 Essay

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ECON 1 Assignment #1B _ Week 1 Catherine Moore What does it mean to think like an economic naturalist? To think like an economic Naturalist is to have a developed thinking process that incorporates the key variables and uses them in a systematic way of examining Sunk Cost. Now that you are becoming an economic naturalist from this point on, discuss the key variables economists use to view their world and tell what each one represents? Scarcity: the need that causes us to choose one opportunity over another because sacristy forces us to not choose both. Economic Surplus: Decisions based on increasing surplus. Always take into account the need to analyze the cost of the opportunity to determine its true benefits. Opportunity Cost: When making a choice you must first recognize the loss of the rejected choice. For example the cost of going to school full-time ($60,000) to get a job that pays $50,000 a year or going straight to getting a minimal paying job ($20,000) with no education. CHOICE A: Going to College – Cost - $60,00 + (4years X)=$140,000 for a four year college. ($50,000 Cost of opportunity A - $20,000 Yearly non degree pay) / $ 140,000 = $4.66 years to make up the cost of Choice A. CHOICE B: Cost – Getting a minimal pay job – $20,000 a year from this point on never going up unless you reevaluate Choice A. If you choose Choice B than Choice A becomes a Sunk Cost and must be reevaluated at the new cost of education in the future. According to the author, what Four Pitfalls do most non-economists mismanage as they attempt to make important lifetime decisions? 1. Measuring the Coast and benefits as proportions rather than absolute dollar amounts. In order to include the absolute dollar amount the cost of an item needs to include expenses used to inquiring the item. 2. Ignoring Opportunity Cost As you take into

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