Graphic Organizer for the “Economizing Problem”
- The need to make choices because economic wants exceed economic means
“It's easy to sit there and say you'd like to have more money. And I guess that's what I like about it. It's easy. Just sitting there, rocking back and forth, wanting that
money.” - Deep Thoughts (Saturday Night Live)
Issue #1: Limited Income
Issue #2: Unlimited Wants
Trade-offs, Opportunity Costs, Choice, and Income Changes
Solution: Budget Line
Practice Questions:
The diagram above shows the demand and supply curves for a normal good.
The equilibrium price could rise from P1 to P2 if
A Consumers’ incomes increased
B P2 were set as a legal maximum
C Subsidies on the production increased
D the price of a complementary product increased
E costs of production were substantially lowered
Assume that a consumer spends all her income on the purchase
of two goods. If the consumer’s income doubles and the prices of
the two goods also double, the quantity of the two goods purchased
will
A Also double
B More than double
C Increase, but it will be less than double
D Not change
E depend on the slope of the demand curve
According to the graph above, if a country is currently producing at
point X, the opportunity cost of producing another consumer good is
A 20 capital goods
B More than 20 capital goods
C. Fewer than 20 capital goods
D. 20 consumer goods
E Fewer than 20 consumer goods
According to Emerson: "Want is a growing giant whom the coat
of Have was never large enough to cover." According to
economists, "Want" exceeds "Have" because:
A. people are greedy.
B. productive resources are limited.
C. human beings are inherently insecure.
D. people are irrational.