Why is gold very expensive, even though it is not essential to life, while water, which is essential to life, is inexpensive?
What will be an ideal response?
Because there is a lower supply of gold it has a higher marginal utility, and hence the willingness to pay for the marginal unit is very high for most consumers. Water is relatively abundant, and hence its marginal utility is rather low, meaning that the willingness to pay for the marginal unit is low for most consumers.
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Typical consumption taxes create an incentive to save
Indicate whether the statement is true or false
On any given day, ________ changes to achieve equilibrium in the money market
A) the nominal interest rate B) the price level C) the real interest rate D) the inflation rate E) real GDP
Private ownership and competitive markets are important for economic growth because they provide individuals with a strong incentive to:
a. care for resources and use them beneficially. b. innovate and introduce new products that are highly valued relative to their cost. c. produce goods efficiently. d. all of the above are correct.
A central bank disinflates. Output falls by 3% for one year, 2% the second year, and 1% the third year. If inflation fell by 2 percentage points, what was the sacrifice ratio?