Determine: The principle of economics in each situation Principles of Economics Principles of economics refer to those generally accepted principles which are the basis of various economic analyses. To Identify: Relevant principles for the given statement.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

The table below shows pizza topping preferences for Marcus, Dakota, and Austin, and that each individual has strictly transitive preferences. Suppose that three individuals make up our "society." In this society, prefer pepperoni to cheese pizza; _prefer cheese to supreme; and prefer supreme to pepperoni. This example illustrates that _ Person Marcus Dakota Austin 0000 First Preference Pepperoni Supreme Cheese Second Preference Cheese Pepperoni Supreme Third Preference Supreme Cheese Pepperoni two-thirds; two-thirds; two-thirds; even if individuals' preferences might satisfy the transitive property, societal preferences may not. two-thirds; two-thirds; everyone; if individuals' preferences satisfy the transitive property, societal preferences must also. two-thirds; two-thirds; everyone; even if individuals' preferences might satisfy the transitive property, societal preferences may not. two-thirds; two-thirds; two-thirds; if individuals' preferences satisfy the transitive property,…

Consider the table below, which has data on insurance status and medical expenditures for different types of professors at Hypothetical University (HU), economics & criminology professors. Assume that there are an equal number of economics and criminology professors. Assume further that econ professors all have the same level of health and criminology professors all have the same level of health. In 2020, every professor was offered a full insurance contract with no premium. In 2021, HU charged any employee who wanted to keep health insurance the actuarially fair premium based on 2020 expenditures. This premium would be equal to and, as a result,professors dropped their coverage in 2021. _ 2020 2021 Insured? Avg. Expenditures Insured? Avg. Expenditures Economics Professors Criminology Professors Yes Yes $25,000 $15,000 000000 $15,000; criminology $25,000; econ $20,000; econ $15,000; econ $20,000; criminology $25,000; criminology ??? $28,000 ??? $10,000

Consider the table below, which has data on insurance status and medical expenditures for different types of professors at Hypothetical University (HU), economics & criminology professors. Assume that there are an equal number of economics and criminology professors. Assume further that econ professors all have the same level of health and criminology professors all have the same level of health. There is evidence of 2021 Insured? Avg. Expenditures Insured? Avg. Expenditures 2020 Economics Professors Criminology Professors Yes. Yes $25,000 $15,000 0000 ??? ??? $28,000 $10,000 I. moral hazard because in 2021 criminology professors dropped their coverage and health expenditures went down. II. adverse selection because in response to rising premiums after 2020, the professors with lower health expenditure dropped coverage Both I and II neither I nor II

Answer 2

Question

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Answer 6

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Answer 7

Chapter 1, Problem 1P

To determine

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.

Answer 8

Expert Solution & Answer

Explanation of Solution

Budget Constraint

The prices of same items are less at discount stores as compared to general departmental stores. So, money can be saved, and this saved amount of money can be utilized to buy more items.

Conclusion:

Amount to buy items is limited. So, ‘Principle - Budget Constraint’ is applicable.

Resources are scarce.

Budget is limited to $35 per day. So, choices should be adjusted according to the budget.

Conclusion:

Choices need to be adjusted in fixed daily budget. So, ‘Principle- Resources are scarce’ is applicable.

People usually exploit opportunities to make themselves better off.

Students sell their used items instead of giving those to other students free of cost. It shows that students are making themselves better off by earning money.

Conclusion:

Here, students are exploiting the opportunity of selling books. So, ‘Principle - People usually exploit opportunities to make themselves better off’ is applicable.

The demand of building material and workers goes high post hurricane

damage caused by, but the supply is limited. Demand and price always have a direct relationship. Therefore, price of material and services rose high.

Conclusion:

Due to high demand, prices get high. So, ‘Principle - Overall spending sometimes gets out of line with economy’s productive capacity’ is applicable.

One person’s spending becomes another person’s income.

The money spent by a friend to buy a book becomes the income of another friend, who sells the book.

Conclusion:

One friend’s spending is another’s earning. So, ‘Principle - One person’s spending becomes another person’s income’ is applicable.

Marginal decision.

Deciding on the number of coffee cups based on the amount of work an extra cup will lead to, shows a marginal decision.

Conclusion:

Here, the decision of coffee cups depends upon the margin of time & work. So, ‘Principle - Marginal decision is applicable’.

Resources are scarce.

Lab space and time for students are limited which shows resource scarcity.

Conclusion:

Lab space needs to be adjusted. So, ‘Principle - Resources are scarce’ is applicable.

The real cost of something is its opportunity cost.

Giving up the semester of abroad study for graduating a semester early shows the sacrifice of one thing to get another, which is the principle of opportunity cost.

Conclusion:

Here, to choose one option, another option needs to be sacrificed. So, ‘Principle - The real cost of something is its opportunity cost’ is applicable.

Market move towards equilibrium.

Bikes of all qualities (higher or lower) are sold for same prices, which means no bike can be sold at a higher price.

Conclusion:

Here, the price for all the bikes is same. So, ‘Principle - Market move towards equilibrium’ is applicable.

Gains from trade.

One is good at lab experiments and another is good at writing reports. So, sharing of the work according to the skills shows the principle of gains from trade.

Conclusion:

Here, work is divided on the basis of specialization. So, ‘Principle - Gains from trade’ is applicable.

When the market does not achieve efficiency, government intervention can improve society’s welfare.

If driving license will not be mandatory, then people will not care about their driving skills and it will increase the risk of accidents. So, to avoid such situations, the government has mandated to get a driving license on the basis of exam.

Conclusion:

Here, the government has made driving licensing mandatory for society’s benefit. So, ‘Principle - When market doesn’t achieve efficiency, government intervention can improve society’s welfare’ is applicable.

Government policies can change spending.

To reduce the tax, parents have increased the allowance of their children, which will directly result in spending capacity.

Conclusion:

Here, government tax policies change the spending capacity. So, ‘Principle - Government policies can change spending’ is applicable.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 1 - Prob. 1P Ch. 1 - Prob. 2P Ch. 1 - Prob. 3P Ch. 1 - Prob. 4P Ch. 1 - Prob. 5P Ch. 1 - Prob. 6P Ch. 1 - Prob. 7P Ch. 1 - Prob. 8P Ch. 1 - Prob. 9P Ch. 1 - Prob. 10P

Determine: The principle of economics in each situation Principles of Economics Principles of economics refer to those generally accepted principles which are the basis of various economic analyses. To Identify: Relevant principles for the given statement.

Determine: The principle of economics in each situation Principles of Economics Principles of economics refer to those generally accepted principles which are the basis of various economic analyses. To Identify: Relevant principles for the given statement.

Explanation of Solution

Want to see more full solutions like this?

Chapter 1 Solutions

Determine:

The principle of economics in each situation

Principles of Economics

Principles of economics refer to those generally accepted principles which are the basis of various economic analyses.

To Identify:

Relevant principles for the given statement.