What are inferior goods?
What will be an ideal response?
Answer: goods for which the demand falls when income rises
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Countries with different initial levels of per capita income may gravitate to a similar level of per capita income. Economists call this phenomenon ________
A) convergence B) simulation C) gravitation D) depreciation
You decide to drive your car on a long road trip of 1,500 miles. The opportunity cost of driving your car:
A. is the amount of money spent on gas. B. is zero because the car is paid for. C. includes lost wages you could have earned instead of driving. D. the total expenses of the trip in the end.
What does it mean that the Fed is the lender of last resort?
a. The Fed is the only institution that lends to banks. b. The Fed lends to banks before other institutions will loan money to them. c. The Fed lends to banks when no one else will loan money to them. d. The Fed ensures that other institutions will lend money to banks.
You are engaged in a debate with a behavioral economist who argues that the philosophy of traditional economics is based on a lie: that all consumers are rational. He argues that since all consumers are sometimes irrational, all of the principles of traditional economics must be thrown out. How would you refute his claim? Identify at least one way consumers behave irrationally and at least one way that a principle of traditional economics can still be successfully applied to consumers.
What will be an ideal response?