Economics Homework Two Answers - Student Six

AddisonDM 10:00, 17 September 2009 (EDT)

1.The price and quantity.

Correct.

2.Price: $18. Quantity: 12

Correct again!

3.When supply increases, price goes down. This is because supply exceeds demand. When supply decreases, price goes up. This is because demand is magnified by a shortage or restricted supply, (scarcity increases). More simply, demand exceeds supply.

Good.

4.When they have an oversupply, they must lower prices to increase demand, so as not to lose money on unsold fruit. The more supply there is (and if the fruit becomes overripe) the more the demand curve slopes down, and it must be picked up again by a price cut.

The explanation seems imprecise here. The first sentence is correct. But the second sentence says, "The more supply there is ... the more the demand curve slopes down ...." The demand curve doesn't change and it doesn't slope down any more in this problem. In fact, all we know (from the Law of Demand) is that the demand curve is downward sloping. We don't know its shape other than that. (Minus 1). Otherwise your answer is correct.

5.They built 600 seats and make $5 per seat, since that is where supply price equals demand price. Under a price control law tickets would sell out (they might anyway but it would happen faster with a lower price.) Possibly no one would have to wait in line, as the tickets would be bought up too fast for lines to form! I would not support this specific law, though in some cases price controls might be a good idea.

Good analysis, but I don't see the need or basis for stating that "in some cases price controls might be a good idea." If you oppose it here, then the reader is left wondering why you would support it in other circumstances.

6.“Time is money.” Translated into math, this is “Time = Money.” When I plug in your example from lecture about working at McDonald’s, it reads, 8 hours = $60, simplified, 1 hour = $7.50. The more you get paid, the more money your time is worth, so you want the highest paying job you can get. (Of course, outside of economics and in real life, you may not always want to convert your time into money. It may be “worth” more to do volunteer work or simply to spend more time studying, or with family, instead of working, if you can make it without that money.)

Excellent, and we'll get to the broader concept of "utility" in the next lecture.

Honors

10\. Economics of healthcare. Basically, there are problems with healthcare: premiums and actual care both cost too much, and they are rising in price. Right now, some people have insurance and get the care they need, while others do not have insurance and cannot get care. However, under a government system, nothing would really change; everyone would have insurance in name, but many would still be unable to get their care because of rationing.

What must be done is first to figure out why insurance and care prices are rising. One reason is malpractice lawsuits. Another is government regulation. Another is lack of interstate competition. Due to these and other factors, when you go to the doctor you are not actually paying the price of drugs or procedures, but those prices with countless other fees piled on top.

Government claims it needs to get into the insurance business to keep insurance companies honest. However, it is due much to government stifling of competition among insurance companies that prices are so high to begin with. What will really make insurance affordable is serious tort reform, a handful of federal regulations (especially no preexisting conditions) which facilitate interstate competition, and tax cuts or subsidies for low-income consumers. I once heard a congressman say that insurance companies are acting like a monopoly. Everyone knows monopolies are inefficient because they do not have to compete with anyone else. Introducing competition into the insurance industry will drive down price and drive up quality- the opposite of what the government plans will do.

Superb answer, may use as a model!

69/70 plus 40/40, for a total score of 109/110. Congratulations!!!--Andy Schlafly 11:07, 20 September 2009 (EDT)