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Chapter 1: Q 3 (page 14)

Does the phrase “unlimited wants and limited resources” apply to both a low-income household and a middle-income household? Can the same phrase be applied to a very high-income household?

Short Answer

Expert verified

The phrase can be allowed to all the three households low-income, middle-income, and very high-income.

Step by step solution

01

Step 1. Definition of economics

Economics refers to the study of wants and the allocation of resources to fulfill the unlimited wants by the best and most efficient utilization of resources.

02

Step 2. Low-income and middle-income.

Yes, the phrase 'unlimited wants and limited resources can be applied to both low-income households as well as middle-income households. The person belonging to whichever group will always have wants that will be comparatively greater than his income and also because the resources in the economy are limited.

03

Step 3. Very high-income group.

The phrase is also true in the case of very high-income households as the wants will change with change in the standard of living and hence the resources being limited the wants will always be unlimited.

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Most popular questions from this chapter

For each of the following approaches that an economist might follow in examining a decision-making process, identify whether the approach relies on the rationality assumption or on the assumption of bounded rationality:

(a) To make predictions about how many apps a person will download onto her tablet device, an economist presumes that the individual faces limitations that make it impossible for her to examine every possible choice among relevant apps.

(b) In evaluating the price that an individual will be willing to pay for a given quantity of a particular type of healthcare service, a researcher assumes that the person considers all relevant health care options in pursuit of his own long-term satisfaction with resulting health outcomes.

(c) To determine the amount of time that a person will decide to devote to watching online videos each week, an economist makes the assumption that the individual will feel overwhelmed by the sheer volume of videos available online and will respond by using a rule of thumb.

Why might the rationality assumption explain why even a chicken farmer who has absolutely no humanitarian concern for chickens might seek to maintain very comfortable conditions for the birds?

How might Figure support the argument that higher incomes associated with greater levels of educational attainment provide an incentive for women to have more children?

Consider the following statements, based on a positive economic analysis that assumes that all other things remain constant. For each, list one other thing that might change and thus offset the outcome stated.

(a) Increased demand for laptop computers will drive up their price.

(b) Falling gasoline prices will result in additional vacation travel.

(c) A reduction of income tax rates will result in more people working.

Under the rationality assumption, could a woman potentially take into account her family's welfare as well as her own when considering having another child? Explain your reasoning.
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