What's the Easterlin Paradox -- and in what sense does it suggest reference-dependent preferences?

What will be an ideal response?


The Easterlin Paradox arises from the empirical claims that (1) at any given time, measured happiness increases with income and (2) measured happiness does not appear to increase over time as societies become richer nor does it vary across societies that have vastly different incomes (above some basic subsistence level). One way to reconcile these empirical claims is to think of consumption-based happiness as being reference dependent; i.e. we evaluate how happy we are about our consumption by comparing it to the consumption levels around us. Thus, we report being happier as our income rises relative to that of others around us, but it does not change when everyone gets richer at the same time.

Economics

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A. not efficient. B. not attainable but efficient. C. attainable and inefficient. D. not attainable.

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The use of government spending and taxation for the purpose of stabilizing the economy is called __________.

Fill in the blank(s) with the appropriate word(s).

Economics

If a perfect competitor is just breaking even it most likely is operating in _______________.

Fill in the blank(s) with the appropriate word(s).

Economics

Answer the next question on the basis of the following information about the hypothetical economy of Asland. All figures are in millions.Unemployed7Total population145Employed95Discouraged workers3The labor force in Asland is

A. 105 million. B. 95 million. C. 102 million. D. 145 million.

Economics