How would you contrast the interactions within a small family to those in the market place? In what way could you argue that the ways in which interactions are governed in the family can never work in a larger market setting -- just as the ways in which interactions are structured in market settings can never work well in families?
What will be an ideal response?
Interactions within families are based on intimate knowledge of each other's tastes and circumstances and are often motivated at least in part by altruism. Interactions in markets require no knowledge other than those of an individual's immediate circumstances -- and they are typically based solely on (narrow) self-interest. The ways in which family interactions are structured cannot work in larger market settings because they would require intimate knowledge of many others' circumstances and tastes -- a problem also faced by a social planner. They ways market interactions are structured cannot easily be applied to families because families are small and individuals within families are therefore "large" relative to the family "economy."
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Jill, an economics student, has already spent 5 hours cleaning her room. In deciding whether or not to continue cleaning for another hour, she applies the economic principle of
A) scarcity. B) ceteris paribus. C) choosing at the margin. D) productivity.
When (if at all) can the crowding-out effect be prevented?
A) when the Fed decreases the money supply to accommodate the expansionary fiscal policy B) when the real money supply is held constant C) when the real balance effect is working D) when the Fed allows the real money supply to increase sufficiently to keep the interest rate from rising
Suppose that the price elasticity of demand for a product is -1 and that the price elasticity of supply is +1 . Assume also that the income elasticity of demand is +2 . Then an increase in income of 10% will raise equilibrium price by:
a. 10%. b. 5%. c. 20%. d. an annual amount that cannot be determined.
The reason a brand name item (e.g., Tyson chicken) has a larger price elasticity than a class of items (e.g., chicken) is that:
A. there are fewer substitutes for Tyson chicken than for chicken generally. B. the share of income spent on "chicken" is larger than spent on "Tyson Chicken". C. there are fewer substitutes for chicken generally than for Tyson chicken. D. it takes a lot of time to adjust to a substitute brand of chicken.