The Basics of Economics Essay

643 Words Jun 24th, 2013 3 Pages
In each of the following identify which of the economic principle(s) (see below) is at work.
a. You pick the shortest line at the store checkout. g. People respond to incentives.
b. The price of new textbooks increased so you buy the used textbook. e. Markets are a good way to organize economic activity.
c. You decide to watch the Olympics rather than study for this test. b. The cost of something is what you must give up to get it.
d. You help your friend with economics, he helps you with philosophy. d. Trade can make everyone better off.
e. The Food and Drug Administration rejected the unsafe product. f. Governments can sometimes improve market outcomes.
f. Opening trade with China lowered the domestic price of textiles. h.
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9. Comparative advantage
j. Change in the quantity demanded of a good that is the result of a change in that good’s price all other influences held constant. 11. Demand Curve
k. A fall in the price of one good makes people more willing to buy the other good. 14. Substitutes
l. Shift in demand curve as a result of a change in a factor other than price of the good. 12. Complements
m. A rise in income increases the demand for a good. 13. Normal good

3. Identify whether the following statement are normative(n) or positive(p).
a. The price of gas is too high. Normative.
b. The Federal Reserve lowered interest rates yesterday. Positive.
c. The long term national debt should be reduced. Normative.
d. Foreign imports are bad for the economy. Positive.
e. Inflation is expected to rise. Positive.
f. More women are enrolled in college than men. Positive.
g. People who smoke pass on increased medical costs to the whole society. Positive.

Suppose that the price of overnight package delivery service is $18 before a $5 excise tax is imposed. With the tax, the price rises to $20. What is the supplier’s burden (incidence) of the tax? Suppliers burden is $3 because $18 + $5 = $23 thus $23 - $20 = $3 What is the consumer’s? It is $2 because originally consumers paid $18, but with tax now pay $2 extra thus consumers burden is $2. Under what circumstances does the burden of an excise tax fall mainly on…

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