Question

The relationship between income and saving is ( direct, inverse; positive, negative ). That means, as income increases, the amount of saving ( increases, decreases, stays the same ).

What is the slope of the line? Slope = ________ = Vertical changes ÷ Horizontal changes

The slope shows the amount of changes in savings due to the changes in income. That is, for every $1 increase in income, the amount of increase in saving will be $_____.

The vertical intercept? ( = $______ ).   The intercept shows the amount of saving (dissaving) occurring when income is (_______ ).

What is an opportunity cost? How does the idea relate to the statement of "There is no free lunch"? Provide an example of opportunity cost from your own economic life.

     An opportunity cost is what was ( s__________ ) to do (or to acquire) something else. The condition of scarcity creates opportunity cost. If there was no scarcity, there would be no need to sacrifice one thing to acquire another.

"There is no free lunch" states that all production involves the use of scarce resources and thus the sacrifice of alternative goods. As the textbook mentioned, “you may be treated to lunch, making it “free” from your perspective, but someone bears a c_____.” This kind of costs or sacrifices are called by economists as o___________ c_________.

What are the three interrelated features of the economic perspective? (Fill blanks!)

   First, economics recognizes that there is a general condition of ( s__________ ) that forces individuals and society to make choices. Human and property resources are scarce, so choices must be made about how best to use those limited resources.

   Second, economics assumes that private or public decision-making is based on “(p__________________ b_______________ ).” People make rational decisions to achieve the maximum satisfaction (or u_________ ) of a goal. Consumers try to get the best value for their expenditures. Workers try to get the best job given their skills and abilities. Businesses try to maximize their profits. College students try to achieve best grade to earn academic credits.  

   Third, economics focuses on ( m__________ a_____________ ) when making an economic decision. The marginal or “additional” costs from an economic choice are weighed against the additional benefit. If the marginal benefit outweighs the marginal costs, then a decision will be made to take the beneficial action. If the marginal cost is greater than the marginal benefit, then the action will not be taken.

Answer 1

The relationship between income and saving is direct . That means, as income increases, the amount of saving increases.

Slope =   = Vertical changes ÷ Horizontal changes

The slope shows the amount of changes in savings due to the changes in income. That is, for every $1 increase in income, the amount of increase in saving will be $ less than one.

The vertical intercept? ( = $Less than one).   The intercept shows the amount of saving (dissaving) occurring when income is ($1 ).

An opportunity cost is what was ( sacrificed ) to do (or to acquire) something else. The condition of scarcity creates opportunity cost. If there was no scarcity, there would be no need to sacrifice one thing to acquire another.

There is no free lunch" states that all production involves the use of scarce resources and thus the sacrifice of alternative goods. As the textbook mentioned, “you may be treated to lunch, making it “free” from your perspective, but someone bears a cost.” This kind of costs or sacrifices are called by economists as opportunity cost.

First, economics recognizes that there is a general condition of ( scarcity ) that forces individuals and society to make choices. Human and property resources are scarce, so choices must be made about how best to use those limited resources.

Second, economics assumes that private or public decision-making is based on “(personal behaviour).” People make rational decisions to achieve the maximum satisfaction (or utility) of a goal. Consumers try to get the best value for their expenditures. Workers try to get the best job given their skills and abilities. Businesses try to maximize their profits. College students try to achieve best grade to earn academic credits.  

Third, economics focuses on ( marginal or additional ) when making an economic decision. The marginal or “additional” costs from an economic choice are weighed against the additional benefit. If the marginal benefit outweighs the marginal costs, then a decision will be made to take the beneficial action. If the marginal cost is greater than the marginal benefit, then the action will not be taken.