Question

1.a) Do these proposals cause more good than harm, in your opinion, or more harm than good? Why?

b) Would you make a distinction between cars and homes in this case? Why or why not?

c)a proposal to impose a $15,000 limit on total household credit card debt. In your opinion, is this a good idea? Or a bad idea? Why?

Answer 1

As a rational human being home is good than car. Home as an asset which exists for long period. It is a long term asset. On the other hand, car is also as an asset. It is also a luxurious commodity. If we are thinking from a perspective of a homeless person. He will prefer home than car. He doesn’t want a car without home. The distinction between car and home different for different people. Low income group will prefer home than car. Higher income will prefer car to get more prestige in the society. For example, a construction worker gets 500 rupees per day; he makes all the household needs using this amount. He lived in a house which is rent. If he made a distinction between home and car, definitely he will prefer home to avoid the extra expense of the rent of the house. He creates extra expense through buying a car. So he prefer home which is good than harm for him. On the other hand, the manager of a company gets 50,000 rupees per month. He maintains a good standard in the economy. Here he will prefer car over home. He already has a home with all facilities.
From my point of view it s a bad idea. Having $15,000 for credit card limit make the consumer to consume more. The consumer has a higher budget line of consumption. It is harm than good. In economic terms, this will increase the consumption pattern. But on the other hand, there is unnecessary consumption will develop. The consumer will purchase more items which is not needed necessary. He will buy more products using online platforms. Due to higher level of this consumption make him to face the ratchet effect. Leading this high income pattern create a trauma. He can’t imagine a situation where low consumption bundle. He can’t consume at lower level. At this situation this limit for credit card is inevitable. Otherwise the consumption will increase to higher level.