What is the fallacy of composition? Give an economic and a non-economic example
Please provide the best answer for the statement.
It is the incorrect reasoning that what is true for an individual (or part of a group) is necessarily true for the whole group. Or, what is true at the micro level of analysis may not be true at the macro level of analysis. Economic example: when an individual farmer produces a large crop, then the farmer should have an increased income because he or she has more output to sell. If, however, all farmers produce more output, then the increase in output may decrease prices and reduce farm income. Non-economic example: If a spectator at a packed basketball arena stands up, then he or she will likely see the game better. If, however, all spectators at the game stand up, then the group of spectators as a whole will not be able to see the game better.
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The marginal propensity to consume (MPC) is the change in consumption divided by the change in saving
a. True b. False Indicate whether the statement is true or false
The primary tool used by the Federal Reserve to change the money supply is _____
Fill in the blank(s) with correct word
Potential GDP in the United States
A) declines over time. B) changes over a given business cycle. C) does not change over time. D) grows as the economy grows.
The terms of trade (TOT) is defined as
A) (index of export prices)/(index of import prices). B) (home-country currency)/(foreign-country currency). C) . D) E) having a competitive advantage over other nations.