Economics Homework One Answers - Student Sixteen

AmandaS

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 an Electronic device , IE. Cellphone, Computer, Video game. We do not need these things, but it is something that we want. For a service, I would say a Plumber. Without them who would fix our drains when they are clogged and not working correctly? We pay for their service, but do not have to put any effort into helping them.

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 cost? Identify two specific transaction cost. Which option is cheaper for your family, and why?: I would say that is cheaper to stay home and eat. It avoids paying for transportation, meal cost, tip and the amount of time spent out. Going to a fast food place, such as McDonald's does not require a tip, and the prices of the meals are fairly cheap, but it still takes time to get to McDonald's along with having to pay for transportation. Staying at home is often a much better decision, it takes time to make the food but unless one is making some extravagant meal it comes out much cheaper.

Good, except not all of the "meal cost" is a "transaction cost." The tax portion would be, but the cost of the food itself is not.

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 specified medical operation (a service), or anything else you can think of that is "scarce" in an economic sense. Scarcity refers to anything that is not free. It is something one wants rather than needs. Diamonds are very scarce, or any kind of rare gem. Since diamonds are so difficult to find they are very rare, which makes the value of them go up even more.

Good example, but things we "need" are also examples of scarcity. So the statement that "it is something one wants rather than needs" is not correct. (minus 1)

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 the pencil): The Invisible hand is an unseen movement that guides and motivates people to work hard in order to benefit themselves and society. It is the force that guides people to do the work that is needed in order to improve society. The invisible hand represents all the social good incidentally caused by individuals pursuing their own self-interest. An example can be something as simple as a book. In order to make a book you have to have all the basic supplies, such as the paper, the ink, the author, and the publisher. What is a book if there is no writing in it? The author creates the story, then uses the ink and paper to write it down. A publisher then comes in and makes it possible for society to read it. Books are very important things, often times they teach us things we do not know. They are able to improve society through knowledge.

Excellent!

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?: Mark 12:42-44 is said to be the only parable in Mark where Jesus uses an economical point using money. The parable is teaching us to give everything we have to the Lord and to put all of our trust in him, which most of us today are not willing to do. When Jesus was sitting near the Money Box in the Temple he watched people continuously put money in and saw many wealthy people give large sums of money. A poor widow then came along and put in two small copper coins which were only worth a few cents. Jesus then called out to his followers saying, "I tell you the truth, this poor widow gave more than all those rich people. They gave only what they did not need. This woman is very poor, but she gave all she had; she gave all she had to live on." I think that the Economical point to this story is showing how a woman who had only a few coins gave them all away trusting God with her needs. These coins were something she greatly valued since they were very scarce for her. She did not have many and she gave them all to God. Today, many people are like the rich people Jesus uses in the parable. We all need money to live, but there is always something we can give up. People are very selfish with their money, especially when it affects their own personal needs. Often times we are not willing to give any money away, if it means sacrificing something of our own.

Good analysis.

6\. "Caveat emptor" or "carpe diem": pick one of these concepts and explain what it means to you: "Carpe Diem" means seize the day. It is to remind one to never waste a good opportunity, because the present day is more valuable than time in the future. I completely agree with this statement. Most of the time people are too focused on what is going to happen in the future that they forget to take time for the present and all the things that are going on around them.

Superb.

Great start! 59/60. Well done!--Andy Schlafly 14:28, 13 September 2009 (EDT)