Question

Define economics. explain briefly how the economic way of thinking-interms of rational, self interested people responding to incentives- relates to each of the following situations.

a. A student deciding whether to purchase a textbook for a particular class.

b. Government officials seeking more funding for mass transit through higher taxes.

c. A muncipality taxing hotel guests to obtain funding for a new sports stadium.

1-2. Some people claim the "economic way of thinking" does not apply to issues such as health care. Explain how economics does apply to both a low-income household and a middle-income household? Can the same phrase be applied to very high-income household?

Answer 1

Economics deals with individual needs of a person which deals with production, consumption and wealth of a person. Enomic needs of a person is such a way that he should satisfy with his limited resources for his unlimited needs.

a) A student will always check the price of text book, teacher, cost of text book, usage of textbook and the gain of buying that book such as any improvement in marks. These are all the things a student considers before buying a text book

b) Government officials seeking more funds through higher taxes is like making them get a negative reputation in the public which may lead to opposition of the public. Seeking higher tax rates may be a good sign for economy but should always consider the reaction of people.

c) Taxing hotel guests will have a negative impact because due to taxes the price of hotel increases for stay which leads to loosing of customers by totally loosing the income.

1-2) What ever may be the income range of person but his unlimited wanted will always rotate around his income which means whatever may be his income he will try to spend in his reach for those unlimited wants, Thus income range neveer change economic thinking.