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Chapter 1: Q 11. (page 25)

What are three reasons to study economics?

Short Answer

Expert verified

The three reasons to study economics are:

  1. Rational behavior of people
  2. Making better policy decisions
  3. Making an efficient thinker.

Step by step solution

01

Step 1. Meaning of Economics.

Economics is the study of how humans make decisions in the face of scarcity. It is about making choices and studying the impact of the choices on each other. It includes individual decisions, family decisions, business decisions, or societal decisions.

02

Step 2. The three reasons to study economics.

The three reasons to study economics are:

i. Rational behavior of people

Economics assumes that people are rational they perform activities that maximize their utility.

ii. Making better policy decisions.

Economics helps in choosing the best policy among the various alternatives and improves our decision-making skills.

iii. Making an efficient thinker

The knowledge of economics makes us knowledgeable thinkers. It helps us in making decisions like what to produce, how to produce, and for whom to produce.

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Most popular questions from this chapter

Explain whether each of the following government activities is motivated by concern about equality or a concern about efficiency. In the case of efficiency discuss the type of market failure involved.

  1. Regulating cable TV prices
  2. Providing some poor people with vouchers that can be used to buy food
  3. Prohibiting smoking in public places
  4. Breaking up standard oil (which once owned 90 percent of all U.S. oil refineries) into several smaller companies
  5. Imposing higher personal income tax rate on people with higher incomes.
  6. Enacting laws against driving while intoxicated

You were are planning to spend Saturday working at your part-time job, but a friend asks you to go skiing. What is the true cost of going skiing? Now, suppose you had been planning to spend the day studying at the library. What is the cost of going skiing in this case? Explain.

A consultant works for $200per hour. She likes to eat vegetables, but is not very good at growing them. Why does it make more economic sense for her to spend her time at the consulting job and shop for her vegetables?

Suppose America decide to save more of their incomes. If banks lend this extra saving to business that use the funds to build new factories, how might this lead to faster growth in productivity? Who do you suppose benefits from higher productivity? Is society getting a free lunch?

What does the "invisible hand" of the marketplace do?

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