What is meant by comparative statics? Is it different from the concept of marginal analysis? Explain with the help of suitable examples
What will be an ideal response?
Comparative statics is the comparison of economic outcomes before and after some economic variable is changed. For example, an individual may choose Apartment A, which is far from his place of work, over Apartment B, which is closer. However, if his opportunity cost of time increases, the total cost of renting Apartment A also increases, and his optimal choice might change.
Marginal analysis, on the other hand, is a completely different concept. It is a cost-benefit calculation that studies the differences between feasible alternatives. For example, if a firm that has 10 employees wants to hire an eleventh employee, it will not consider the net benefit of the 10 employees who are already employed. Instead, the firm will focus only on estimating the net benefit of hiring the eleventh employee to arrive at a decision.
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The figure above shows the market for tires. The government has imposed a tax on tires, and the sellers pay ________ of the tax
A) $10 B) $20 C) $50 D) $60 E) $30
A tariff is a tax on either imports or exports
a. True b. False
The portion of the four-sector circular flow model which shows the flow of funds from savers to borrowers is the:
a. product market. b. factor market. c. savings market. d. financial market.
The primary benefit of monetary exchange compared to barter exchange is: a. the possibility of tracking trade for tax purposes
b. increased time devoted to finding trade partners. c. increased time devoted to shopping for what we want. d. increased efficiency in arranging transactions.