Economy Chapter 1-2

Define opportunity cost. Give an example.
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Define opportunity cost. Give an example.
What you give up when making a choice, the cost of choosing that option. An example of this is that I could be using my time playing a game which is much funner but I chose to study an fill out this worksheet since it out weights the cost not playing that game.
Identify the one resource that is inevitably scarce for all individuals. Illustrate how its
scarcity confronts each individual with a quandary of choice by giving an example.
Time is scarce for every individual. This scarcity forces people to choose the best option which is normally either the quickest of the most worth while option so not to waste our time. An example of this is microwaving ramen or hot cereal to eat instead of cooking for a long time making something like chicken or tacos.
Critique the following assertion: Money is the great escape from scarcity.
Not everyone has money, and even if they did, other things like time or materials would still be scarce. With unlimited money other things would become a scarcity and they would not have enough time to use that money.
Identify the point at which ideology enters the scientific process. Explain the effect of
ideology on model building. Respond to the following statement: Ideologically
biased theories are useless, so we must only put our trust in theories that are not
ideologically tainted.
It enters ideology during vision, all the theories are biased in some way, so the ideology will come into play in order to play a part in the bias. Ideology is the base for the vision of the model. One may try to be unbiased, their ideology will be reflected in the model.
Explain the distinction between strong and weak assumptions. Describe the
relationship among strong assumptions, weak assumptions, and relaxed
assumptions. Give an example of relaxing an assumption.
A strong assumption assumes a lot, it abstracts significantly from reality. While a weak assumption is more realistic and closely represents reality. Relaxing an assumption is to go from a strong to a weak. An example would be relaxing the assumption of no scarcity in the garden of eden.
Identify what the ceteris paribus assumption holds constant. Demonstrate how the
ceteris paribus assumption is used with an example.
Ceteris paribus holds everything constant except for one value. Some of our assumptions will be maintained for the entire course of the analysis. For example the more I stay awake, the better more tired I get.
Identify the motive that we assume drives the choices of all individuals all the time.
We can assume that the choices individuals make all the time are driven to maximize their utility.
Define marginal utility. State the assumption of diminishing marginal utility. Explain
this assumption using an example.
A specific amount of satisfaction that you get when you make a choice. As you continue with your choice weather it be going swimming or eating food, the individual asks themselves how much did this satisfy me. Slowly the satisfaction will go down until the individual feels its time to stop because they are no longer getting anything from doing that action.
Define optimize. Explain the concept: optimal allocation.
To optimize is to reach the best outcome. Optimal allocation is about doing something that substitutes that time with another activity in order to get the most utility.
Explain the concept of a constrained optimization problem.
The constrained optimization problem balances at the margin, by increasing utility when there is scarcity.
Describe society's endowment. Explain the relationship between society's endowment and scarcity.Society's endowment includes natural and human resources from which all goods and service must be produced. Our resources are finite so we face scarcity because there is only a certain amount of it, this amount can fluctuate because we don't know exactly how much we have, but we can run out of it.Illustrate the following assertion: a society's endowment is finite, but it is not fixed.Society only has with a certain amount of resources, no one is certain exactly how much there is. If new resources are discovered, society's endowment increases. If resources are destroyed, the endowment decreases.Describe intertemporal choice. Give an example.How current decisions affect what options become available in the future. An example of this could be the decision of buying something like a skateboard, how will that effect paying for college in the future.Describe the challenge of intertemporal choice.Choices made now that affect you some time in the future. You decide now not knowing how this will affect the will be years from now. This can be challenging, you have to think about both the present and future so you can compare the benefits and costs.Explain the concept of discounting the future. Give an example. Identify economists' assumption about our attitude toward satisfaction that will be realized in the future.To diminish the value of the future. People want to be satisfied now the further into the future, the more diminished value is. One marshmallow now is better than two in the future. Economists use the assumption that people discount the future.Describe how a changing discount rate can affect one's choices. Give an example.When your discount rate changes, you choices are changing. For example,if you are reading in the library and it starts to be on fire, you are going to run to the escape not continue reading, this is because your rate has changed leaving is now more important than reading that book.Define saving and investing. Identify, ceteris paribus, who you would expect to do more saving and investing: Someone with a high discount rate or someone with a low discount rate.Our discount rate is different and can be influenced through experiences. This can change at any given the time or place.(this is wrong but don't have enough time to chang)change!Describe the process of assigning a probability to a risk. Comment on the following statement: Risk assessment is the same for everyone.We consider a probability for each choice, and try to figure out if it will work out as we plan, which is factored by a person's perception of risk based on that choice. Risk assessment is not the same for everyone. We all have different perceptions of risk.Illustrate the way different perceptions lead to different choices among individuals with an example.Everyone has different perceptions, and measure risks differently I may find skydiving more dangerous than fun, but someone may believe that The excitement of skydiving far outweighs the danger.Using our model, explain the process of choice between two options like going to college and getting a job. Describe how our model explains the demographics of undergraduate students.Going to college is means a longer education, but afterwards there is more opportunity in the future to get a high paying job. Getting a job right off the bat helps pay for things now and still gives you a good chance to get a high paying job but it is much more risky. Demographics show that as you age your discount rate increases making you less likely to get a degree.Describe how perception management can be used as a tool of government policy. Give examples.Government uses propaganda to make people to perceive something, through ads, videos, news and media.Illustrate with an example how socially developed perceptions of gender roles affect behavior according to our model.Media makes incredibly skinny women seem like the standard of beauty, some girls pursue these expected present values in very dangerous ways to achieve what this image seems to hold for them. This is often more likely if they have a very high discount rate and a very low perception of risk.Give and explain an example of how our model applies to a public or private use of media.While society shapes the frame of our lives each of us has a unique biography that makes us a unique being. We all have different preferences and while media can be used as propaganda to sway us it can also but used for us to see different opinions and learn more information before making a decision.Explain why policy is complicated. Demonstrate, with an example, how complicated policy based on our model can be.Policy is complicated because people have different values. For example some people value environmental sustainability more than others. They believe we need to do something now rather than in the future.