Critical Thinking 1: The diamond-water paradox In "An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776, Adam Smith wrote: "Nothing is more useful than water: but it will purchase scarcely anything... A diamond, on the contrary, has scarcely any use- value; but a very great quantity of other goods may frequently be had in exchange for it" Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Critical Thinking 1: The diamond-water paradox In "An Inquiry into the Nature and Causes of the Wealth of Nations" published in 1776, Adam Smith wrote: "Nothing is more useful than water: but it will purchase scarcely anything... A diamond, on the contrary, has scarcely any use- value; but a very great quantity of other goods may frequently be had in exchange for it" Explain the diamond-water paradox and find out in the literature how economists have later solved this paradox.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter18: Pricing The Factors Of Production

Section: Chapter Questions

Problem 4TY

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Dr Rafiu is planning to send his son to study Finance either at KFUPM or Imam Abdulrahman Bin Faisal University, ceteris paribus. When the session is about to start, the school fees of KFUPM increases while that of Imam Abdulrahman Bin Faisal University remain the same. So, Dr Rafiu decides to enroll his son at Imam Abdulrahman Bin Faisal University. (a) What kind of goods can you classify the two universities from the perspective of Dr Rafiu? (b) What is the nature of elasticity facing Dr Rafiu (hint: elastic, inelastic, Unitary)
) A newspaper article mentions that two of South Korea’s largest semiconductor manufacturers, - Samsung Electronics Company and Hynix Semiconductor - would suspend all their memory chip production for some time. The article goes on to say that another large semiconductor manufacturer was likely to follow suit. Collectively, these chip manufacturers produce about 30 percent of the world’s basic semiconductor chips. Based on this information, how is the market for computers altered? Explain in detail.
Consider Snackistan, a hypothetical country that produces only burritos. In 2019, a burrito is priced at $1.00. Complete the first row of the table with the quantity of burritos that can be bought with $900. Hint: In this problem, assume it is not possible to buy a fraction of a burrito, and always round down to the nearest whole burrito. For example, if your calculations result in 1.5 burritos, the answer should be 1 burrito. uppose the government of Snackistan cannot raise sufficient tax revenue to pay its debts. In order to meet its debt obligations, the government prints money. As a result, the money supply rises by 40% by 2020. Assuming monetary neutrality holds, complete the second row of the table with the new price of a burrito and the new quantity of burritos that can be bought with $900 in 2020. The impact of the government's decision to raise revenue by printing money on the value of money is known as the ________
A newspaper article mentions that two of South Korea’s largest semiconductor manufacturers, - Samsung Electronics Company and Hynix Semiconductor - would suspend all their memory chip production for some time. The article goes on to say that another large semiconductor manufacturer was likely to follow suit. Collectively, these chip manufacturers produce about 30 percent of the world’s basic semiconductor chips. Based on this information, how is the market for computers altered? This answer involves no numerical computation. However, graphs/plots should be used to elaborate your answer. Explain plus make graphs for this answer.
Plant milk sales in the United States totaled $2.5 billion at the end of 2020, accounting for 15% of all retail sales of milk, and 35% of the larger market for plant-based foods. By the end of 2026, Olson said, sales of dairy alternatives are projected to make up 30% of all milk sales. Much of that growth, Purcell said, will come from small-batch producers. Illustrate and explain the effect of the increased use of plant-based milk on (i) the dairy market and (ii) the overall milk market.
According to a researcher at the FDA, vegan foods are “the way if the future”. Morepersons have become health conscious and are looking for foods which will fit thislifestyle. One such food is the Beyond Burger, a plant-based alternative to beef. Notably,despite strong demand for beef burgers, the supply chain has seen a host of disruptionsthat are preventing producers from getting their products to market.Beyond Burger’s sales in Canada totaled $3.0 billion at the end of 2021, accounting for20% of all retail sales of burger patties (meat used in burgers), and 40% of the largermarket for vegan foods. By the end of 2025, sales of Beyond Burgers are projected to makeup 40% of all burger sales.i. Illustrate and explain the effect of the increased use of Beyond Burgers on (i) theburger patties market and (ii) the vegan market.
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Review the discussion of pitfallsin economic thinking in this chapter. Then identify the fallacy, ormistake in thinking, in each of the following statements:a. Raising taxes always increases government revenues.b. Whenever there is a recession, imports decrease. Therefore, tostop a recession, we should increase imports.c. Raising the tariff on imported steel helps the U.S. steel industry.Therefore, the entire economy is helped.d. Gold sells for about $1,200 per ounce. Therefore, the U.S.government could sell all the gold in Fort Knox at $1,300 perounce to reduce the national debt.
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can you answer these questions too: Suppose that more consumers prefer the disposable cell phone over the smart phone because the disposable cell phone is more durable than the smart phone. This latest news comes after the fact that firms that manufacture disposable cell phones have the latest technology integrated into their production facilities. What will be the market effect? Going back to question (d), suppose that the price of a disposable cell phone is now set at $11.75. How many disposable cell phones will be demanded by consumers? Whichever curve you’ve determined should be shifted, derive the new function.
In Happy Claptown, there are only 3 goods: Burgers, Patties, and Pizza. The following table shows the prices and quantities produced of these goods in 1990, 2000, and 2010: 1990 1990 2000 2000 2010 2010 Price Quantity Price Quantity Price Quantity Burgers 2.00 500 1.00 600 1.10 690 Patties 7.00 300 10.00 200 10.50 110 Pizza 0.70 300 4.00 200 0.75 420 a) A "market bundle" for a typical family is deemed to be 5 burgers, 3 patties, and 4 pizzas. Compute the consumer price index (CPI) for each of the three years, using 1990 as the base year. b) What was the rate of inflation from 1990 to 2000, using the CPI you calculated in (a)?
1. Show the market for potatoes on a graph and show what will happen if there is a drought in Idaho (where a lot of potatoes are grown) b. On another graph, show what will happen in the market for potatoes if there is a drought in China (where, I presume, a lot of rice is grown).