Question

Please read the forum instructions above before you post for the forum 1. By now you have learned some fundamentals of economics. How can you apply economic thinking (what you have learned so far) in your daily life? Please give a unique example to illustrate your application. Before you post your own example please read others postings to avoid duplicate posting. Your personal statement is due by the end of Wednesday.

Lesson learn so far

Learning Objectives

1. Identify the concepts of scarcity and economics.

2. Identify the three categories of resources

3. Distinguish between "macro" and "micro."

4. Distinguish between "positive" and "normative" economic analysis.

1. Identify the opportunity cost of an action.
2. Generate the graph of a production possibilities curve for any two commodities.
3. Determine the application of the the principle of marginal cost and benefit for decision making.
4. Given a graph of a production possibilities curve, determine the opportunity cost for producing each commodity.
5. Given a graph of a production possibilities curve, identify a combination of outputs as inefficient, efficient, feasible, or infeasible.
6. Identify the law of increasing opportunity cost and reasons for its existence.
7. Identify different type of economic growth in the context of a production possibilities model
8. Apply economic thinking in our daily life.
9. Distinguish between a change in quantity demanded (supplied) from a change in demand (supply).
10. Identify the factors that shift the demand and supply curves.
11. Given information on supply and demand in a market, graphically determine the equilibrium price and quantity of a good.
12. Given information on supply and demand in a market, identify a surplus and a shortageSubject
13. 1. EC101 Chapter 1,2,3 and4

Answer 1

1. Opportunity cost of an action is the forgone value or the payoff that is linked to some other action or activity that was available as an option. Consider a firm has total resources of 100 that it can use to produce two goods x and y. If it decides to produce one good say x, then the opportunity cost of such an action is the quantity of good y forgone, that could have been produced with this resource.
2. 
3. The principle of marginal cost and benefit is applied to determining the viability of the long term projects such as pollution impact mitigation projects etc. when they involve investment that bear an influence on the production of other goods. This is used at ‘micro’ as well as ‘macro’ level. Thus an individual decision to buy a certain good compares the marginal cost or the supply price with the marginal benefit or his ‘willingness to pay for the good and buys if MB>MC. Likewise for projects involving large capital investment, the decision on whether or not under taking such a project depends on the relative strength of marginal cost and marginal benefit from such investment. If the discounted marginal benefits outweigh the discounted marginal cost then the projects are undertaken, otherwise not.
4. Consider points such as A and B. The movement from A to B involve increasing X from xa to xb while the Y decreases from ya to yb. The opportunity cost of moving from A to B to increase the production of good X = (yb-ya)/(xb-xa)

Opportiunity cost of good Y in terms of X would be 1/opp cost of good X = (xb-xa)/(yb-ya)

5. Point such as K, A and B are feasible since they lie on or under the PPF.

Points such as K: this depicts an inefficient level of output since the output can be increased by moving onto the frontier. Thus point K represents a combination of output such that it is feasible but inefficient.

Points such as A and B are efficient. Since they are using all the resources and producing an optimal set of goods on the production possibility frontier. Thus A nd B are both feasible and efficient.

Points such as L are infeasible since they are outside the PPF and resources are not sufficient to produce such a combination

Please post parts in a lot of four.