Unit 1 Essay

997 WordsMar 5, 20134 Pages
Unit 1 Assignment: Principles of Economics Matching Exercise Each scenario below practices one of the 10 principles of economics. Match the principles to the appropriate scenario listed and justify your answer. Each principle will only be used once. Principles: 1. People face tradeoffs. 2. The cost of something is what you give up to get it. 3. Rational people think at the margin. 4. People respond to incentives. 5. Trade can make everyone better off. 6. Markets are usually a good way to organize economic activity. 7. Governments can sometimes improve market outcomes. 8. A country’s standard of living depends on its ability to produce goods and services. 9. Prices rise when the government prints too much money. 10. Society faces a short-run tradeoff between inflation and unemployment Scenarios Even though generally more expensive, energy efficient appliances and vehicles sell better with a rebate or tax credit. * People respond to incentives.: when the price of automobiles rises, buyers have an incentive to buy fewer cars while automobile producers have an incentive to hire more workers and produce more autos. * Airlines will charge a fee for each additional suitcase you may want to take with you on a trip. * The cost of something is what you give up to get it.: for making decisions it requires by an individual’s to consider the benefits and costs of some action. At a restaurant, when ordering an entrée, you get to choose two side dishes from a group of five side dishes. * Rational people think at the margin.: Rational people systematically do the best they can to achieve their objectives. Marginal changes are incremental changes to an existing plan. Rational decision makers only proceed with an action if the marginal benefit exceeds the marginal cos * Instead of growing your own food

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