Essay about Economics and Rational People

783 Words Apr 21st, 2013 4 Pages
AB204-02

04/20/2013

Unit 1 Assignment: Principles of Economics Matching Exercise

Student Name:
Date: 04/19/13

Each scenario below practices one of the 10 principles of economics. Match the principles to the appropriate scenario listed and justify your answer. Each principle will only be used once.

Principles:

1. People face tradeoffs.< 2. The cost of something is what you give up to get it.< 3. Rational people think at the margin.< 4. People respond to incentives. 5. Trade can make everyone better off.< 6. Markets are usually a good way to organize economic activity.< 7. Governments can sometimes improve market outcomes.< 8. A country’s standard of living depends
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* Markets are usually a good way to organize economic activity just like when people have a garage sale no one is telling them what each item should sell for and in many cases this make both buyer and seller happy and many times multiple families can contribute *
In its effort to limit the effects of rising inflation, the Federal Reserve System reduces the quantity of money in the economy, but sees an increase in unemployment. * I think society faces a short-run tradeoff between inflation and unemployment is the answer here because you are taking away the money but more people are seeking extra money because they were laid off do to employers not having enough money to pay the employees
While consuming the same amount of farmers’ labor and capital the newly developed hybrid crops achieve twice the yields of the previous crops. * The cost of something is what you give up to get it. The farm had to pass on getting new employees to develop the hybrid crops and produced more food to sell

You have noticed that the same amount of money buys you fewer goods and services than it did a year ago. * A country’s standard of living depends on its ability to
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