Question

For each of the following, indicate how you might apply the four core principles of economics.

1. You are considering whether you should vote in the next election.

2. You watch a beautiful sunset from the back porch of your home.

3. Should you major in economics or philosophy?

4. Should you and your spouse purchase a second vehicle?

Answer 1

Considering for vote:

No.1) there is trade-off between to give “vote” or not to give “vote”.

No.2) if the opportunity cost of giving vote is lower than not to give vote then there will be voting in the election, otherwise not – suppose the loss of earning for the whole day if choose to vote.

No.3) there would be a rational thinking of benefits between “vote” and “not to vote”.

No.4) there must be an incentive of giving vote – suppose a good government will come who can reduce the income tax rates.

Considering the sunset:

No.1) there is trade-off between “watching sunset” and “being lazy”.

No.2) if the opportunity cost of “watching sunset” is lower than “being lazy” then the sunset should be watched, otherwise not – suppose the loss of comfort of being lazy is the opportunity cost here.

No.3) there would be a rational thinking of benefits between “watching sunset” and “not to watch sunset”.

No.4) there must be an incentive of watching sunset – suppose the pleasure one gets out of that watching.

Considering a major:

No.1) there is trade-off between economics and philosophy.

No.2) if the opportunity cost of “being a major in economics” is lower than “being a major in philosophy” then the person would be a major in economics, otherwise not – suppose the income of philosophise is the opportunity cost of economist here.

No.3) there would be a rational thinking of benefits between “being a major in economics” and “being a major in philosophy”.

No.4) there must be an incentive of being a major in either of these two subjects – suppose the income would be high in economics.

Considering the second vehicle:

No.1) there is trade-off between “second vehicle” and “first vehicle”.

No.2) if the opportunity cost of “second vehicle” is lower than “first vehicle” then the second vehicle should be purchased, otherwise not – suppose the high road tax in first vehicle is the considering factor.

No.3) there would be a rational thinking of benefits between “second vehicle” and “first vehicle”.

No.4) there must be an incentive of second vehicle – suppose they are the new users and want to make practice with second vehicle.