lecture 3 - scarcity, work and choice

Question 1

what has technological progress been accompanied by?

Answer 1

dramatic rise in wages

Question 2

what has happened to working hours in many countries?

Answer 2

changes in legal boundaries such as there may be a maximum amount of hours in which someone can work

Question 3

how have people used economic progress?

Answer 3

to consume more goods but also enjoy more free time

Question 4

how do have people enjoyed more free time but also consumed more?

Answer 4

the average working hours have feel whilst wages have risen

Question 5

what has happened since late 1800s?

Answer 5

living standards have increased

Question 6

what model is used in the unit?

Answer 6

the model of individual choice

shows different countries average ours and gdp per capita

Question 7

what is hard to measure in relation to jobs?

Answer 7

work and effort

Question 8

how do economics normally measure labour due to work and effort being immeasurable

Answer 8

number of hours worked individuals engaged in production

Question 9

what is the assumption surrounding working hours?

Answer 9

the more hours worked the more goods produced

Question 10

why is there a problem with using ceteris paribus when looking at the outcome of people with different working hours?

Answer 10

there may be factors that affect the way that they work rather than it just being the hours they put in
e.g difference in general mentality

Question 11

what is production function?

Answer 11

en equation that expresses the relationship of factor inputs used by someone to the amount of output as a result

there is at least one fixed factor input

e.g studying
the amount of hours studying (input) relates to grade (output)

Question 12

what would be a marginal product in this unit?

Answer 12

effect of an output if they were to work/study for an extra hour

Question 13

how come as the curve increases marginal product diminishes?

Answer 13

as they study more it will start to flatten out due to various factors such as lack of sleep

production function would start to decrease

Question 14

if production function slope strats to flatten due to marginal product becoming negative, what is this production function shape known as?

Answer 14

concave

Question 15

how do you work ou the slope on the model of individual choice?

Answer 15

vertical distance / horizontal distance

e.g marks / hours
= the production function

Question 16

what is a trade of?

Answer 16

how much of the input they put into achieving an output someone wishes to give up for someone else

Question 17

what does an indifference curve show?

Answer 17

all of the combinations that provide equal utility or satisfaction

Question 18

which way do indifference curves slope?

Answer 18

downwards

Question 19

what does it mean if an indifference curve is higher?

Answer 19

it corresponds by having higher utility levels

have more of two goods

Question 20

what is the marginal rate of substitution?

Answer 20

rate at which a consumer is ready to exchange a number of units of a good for another good

e.g giving up more marks in order to have more free time

Question 21

what is the MRS on models of indifference?

Answer 21

it is just the slope of the indifference curve
used to map trade offs in terms of what’s preferred

instead of what is feasible

Question 22

if the indifference slope is flat what does this mean?

Answer 22

the MRS is small

e.g if someones grade is already low they are les willing to substitute horus of free time compared to if grade was high (MRS would be bigger)

Question 23

what do choices depend on?

Answer 23

constraints and involve trade offs

Question 24

what is the opportunity cost?

Answer 24

the net benefit of the next best alternative action

Question 25

what is an economic cost made up of?

Answer 25

monetary cost (transport) + subjective costs (effort)

Question 26

what is the feasible frontier?

Answer 26

the maximum output that can be achieved with a given amount of input
(everything inside the indifference curve)

maps what is feasible

Question 27

what is the MRT ?

Answer 27

the slope of the feasible frontier

represent the trade offs in terms of what is feasible

Question 28

when is an action said to be infeasible?

Answer 28

if it lies outside of the feasible frontier

Question 29

what is the definition of MRT?

Answer 29

the quantity of some good that must be sacrificed to acquire on unit of another

Question 30

what happens when you bring the feasible frontier and indifference curves together?

Answer 30

shows the constraint trade off and the preference trade off

Question 31

how would a person decide which point to choose using indifference and feasible frontier?

Answer 31

the point in which they cross

shows the highest utility

Question 32

what is a contained choice problem?

Answer 32

these problems provide a way to rogourisly thin k about how to do they best for ourselves

given preferences
given contranist
when the things we value are scarce

Question 33

what off the feasible frontier changes for reasons such as technological improvement?

Answer 33

it would be feasible to gain and have more free time

Question 34

what isa budget constraint?

Answer 34

the feasible frontiers for consumption choices

Question 35

what is the optimal choice of income?

Answer 35

where the indifference curve (MRS) equal the wage

Question 36

what is the income effect?

Answer 36

the change in optimal choice when income changes, keeping the budget constraint slope the same