Quiz 1: The Economic Approach
a. A reduction in the temperature from 80 degrees to 50 degrees shall not provide a strong incentive on one's decision to go swimming as the water will become colder. b. A change in the meeting time of the introductory economics course from 11:00 AM to 7:30 AM shall not encourage an individual to attend the lectures as he/she shall have to reschedule all his other appointments or lectures. c. A reduction in the number of exam questions that relate directly to the text shall encourage the student to read the text more carefully so that he or she is able to score more in the exams. d. An increase in the price of beef shall discourage an individual to buy steak. Instead he or she will look for a less expensive alternative that could buy him or her more of the substitute good. e. An increase in the rental rates of apartments shall provide a strong incentive to an individual to build additional rental housing units since he or she shall be able to earn more money.
The given statement is false. The population of an economy is divided between poor and non-poor. The government provides goods such as health care, education, and highways for free to poor population. Even the non-poor population enjoys some of these facilities like highways, roads and others for free. The government receives money from the taxable income group (that is the non-poor population) for the expenditure purpose and recovers all its costs from these taxes.
a) Every economy in this world faces the problem of scarcity of resources in relation to their demand. Thus, in an effort to make goods available to the society at large the market economies use price as the method to ration the goods. In this manner the goods and services are supplied by producers to only those individuals who are ready and able to pay the current market price for them. b) In a class, the grades of students may be rationed on any one of the basis, that is: 1. On the basis of student's individual performance: In this method, the students work hard to get higher grades and stay in competition. Their learning enhances. 2. On the basis of teacher's favors': In this method, those students get high grades that are liked by the teacher. It is more of personal bias. This does not create healthy competition amongst the students. 3. Thus, method 1 is better for student's grades rationing.