Economics Homework One Answers - Student Twenty-One

Michelle F- done

1.Give an example of a "good" not in the lecture, and an example of a "service" not in the lecture.

A good would be a house. A service is the work put in by the realtor selling the house.

Excellent.

2. Imagine that your family has two options for dinner: eat at home, or go out to eat at McDonald's. Which option incurs more transaction costs? Identify two specific transaction costs. Which option is cheaper for your family, and why?

Eating out nearly always incurs greater transaction costs. McDonald’s is no exception. Cashiers, the people cooking the food, the person who owns the restaurant, all of whom need part of the profit, all add to the transaction cost. Even though there are still cashiers and people who work at a normal food store, it still incurs fewer transaction costs, and is less expensive.

Right, plus the time and expense required to get there to eat a meal.

3. Define the concept of "scarcity" in your own words, and give an example of how an increase in scarcity for a good or service increases its price. Your example might be a World Series ticket (a good) or a special medical operation (a service), or anything else you can think of that is "scarce" in an economic sense. Extra credit: when do people exaggerate scarcity in their minds?

Scarcity- any good or service you would buy instead of going through the trouble of producing it or simply don’t have the skills to produce. Something like an old book or rare document is scarce, which is often the only reason the object has any intrinsic value. As the scarcity goes up, so does the price tag. Scarcity can be exaggerated when buying property. Real estate in some areas of America is rather scarce, making it worth far more money. It may not actually be any better than a large number of far less expensive sites, but they are scarce, so people pay a larger price. People often exaggerate scarcity in their own mind after they buy something, in an effort to justify the purchase.

Superb.

4. What is the “invisible hand”? Discuss what it is, using an example (which could be from the story in the lecture about the making of a pencil).

I think you forgot to answer this one! Minus 10. Oh no!

5. There are many parables by Jesus in the Gospels of Matthew and Luke (and one in Mark) which use familiar concepts of money and economics in order to teach a deeper, more profound spiritual point. Examples are at Matthew 13:18-23 and 44-46; Matthew 18:21-35; Matthew 20:1-16 and 21:33-46; Mark 12:41-44; Luke 7:36-50; Luke 12:13-21; Luke 14:15-24; Luke 15:8-10; Luke 16:1-13 and 19-31; Luke 18:9-14; and Luke 19:11-27. Pick one of these parables and explain both the economic point and the deeper spiritual point. Extra credit: why might the Gospel of Matthew have more economic parables than the Gospel of Mark does?

41Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42But a poor widow came and put in two very small copper coins, worth only a fraction of a penny.

43Calling his disciples to him, Jesus said, "I tell you the truth, this poor widow has put more into the treasury than all the others. 44They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on."          Mark 12:41-44

In this parable the wealthy people who gave larger sums of money were less generous, as they were giving what they had no need of. The widow gave the money she desperately needed. She gave beyond what she was reasonably able or culturally expected to give. Economically, it was greater because she gave a greater percentage of what she had. The Gospel of Matthew may have more parables dealing with money because Matthew was a tax collector before he followed Jesus.

Excellent, also plus one for extra credit!

6. "Caveat emptor" or "carpe diem": pick one of these concepts and explain what it means to you.

“Caveat emptor”, or, “let the buyer beware”. In today’s society, everywhere you turn, you are encouraged, cajoled, urged, tempted, inveigled, and wheedled into parting with your money. Those selling their products can be shameless in advertising. Every time you turn around there are more advertisements, telling you how fabulous their product is, how much easier it will make your day, how much you need it. In your mail, on billboards, on most websites, commercials, if they can advertise there, they are. And not al the claims they make are entirely factual. Some insinuate a capability that they’re product does not have. Some let you assume things that were not said. For instance, the cell phone commercials, which tell you, they have better service in more places. Yes, but notice they do not tell you where those places are. The car advertisements which neglect to tell you they used all the optimum conditions when testing the mpg of their vehicle. Now more than ever, the onus is on the buyer to research the product sufficiently before buying.

Fantastic answer. May use as a model.

Honors

What is money really?

    In class, an interesting question was asked; is money a service or good? Or maybe a category entirely its own? I was so intrigued by this that I decided to do some research on the subject, and see what money really is. 
    First, a working definition of money is required. Money is a measure of worth, a means of exchange, which need not have any intrinsic value of its own; a legally established exchangeable equivalent for all other commodities. It can be backed by a gold or silver standard, but does not have to be; in the U.S., we have a “fiat” currency, which is any money not backed by gold or silver, and not necessarily redeemable in coin.  
   So money is obviously not a service. It isn’t an action, or entertainment, etc. However, it often shows work, thought, performance, and effort, all of which are types of services. A dollar symbolizes a percentage of your day, a portion of energy and exertion, and other various services.  Therefore, while money is not actually a service, it represents them.
    But what of the question of whether or not money is a good. It certainly isn’t free, so it is scarce. Work must be done to obtain it, services or goods provided in exchange. Apart from the value ascribed to is by the foreign exchange market, it is worthless. Money has no value of its own, no importance or desirability other than the goods or services someone would give you in exchange for it. So its value is not in use, but in exchange, like a precious metal or stone.
    The conclusion I reached is that while money is not a service, it represents those things, like a ticket to a concert, or sports game. And it is a good, because although it has no value in use, money has value in exchange. So in a way, money is in a category of its own, because it has value as both a service and a good.

Terrific essay! Will use this a model answer!!!! In fact, this essay is so good (and show so much initiative) that I'm giving you extra credit on it of 8 points.

Total score: 52/60 on regular part (including extra credit), plus 40/40, plus 8 points extra credit on essay: total 100/100. Congratulations!