Lesson 4 pg. 12 - 15

Question 1

Define value

Answer 1

value - the worth that consumers attach to a good

Question 2

What does the value of a good vary according to?

Answer 2

The value of a good varies according to its utility (usefulness) and its scarcity (limited availability) at a particular time and at a particular place.

Question 3

Describe the Carl Menger’s solution to the economic riddle known as “Diamond-Water Paradox”

Answer 3

One of Carl Menger’s, the founder of the Austrian school of economics, was born in Galicia, major contributions to the development of economics is his solution to the economic riddle known as the Diamond-Water Paradox asked why rare items such as diamonds normally command high prices while necessities such as water usually command low prices and answered that the price of an item raises in value due to its scarcity in an area where is it is needed.

Question 4

Which is more important in determining value: scarcity and utility or the amount of labor required to produce?

Answer 4

It is scarcity and utility that usually determine the value of any good.

Question 5

Why was economics originally called political economy?

Answer 5

Governments always have greatly influenced economic matters, which is why economics originally was called political economy