Economics Homework One - Model

1. Give an example of a "good" not in the lecture, and an example of a "service" not in the lecture.

2. Imagine that your family has two options for dinner: eat at home, or go out to eat at McDonald's. Which option incurs more transaction costs? Identify two specific transaction costs. Which option is cheaper for your family, and why?

The option of choosing McDonald's instead of eating at home would cause more transaction costs. The main transaction costs would be the cost of the gas and the time that it would take to get there. You will also have to pay for the service that you receive from the McDonald's employees. To eat at home would be a much cheaper option as there are hardly any transaction costs. (Isaac)

3. Define the concept of "scarcity" in your own words, and give an example of how an increase in scarcity for a good or service increases its price. Your example might be a World Series ticket (a good) or a special medical operation (a service), or anything else you can think of that is "scarce" in an economic sense. Extra credit: when do people exaggerate scarcity in their minds?

4. What is the “invisible hand”? Discuss what it is, using an example (which could be from the story in the lecture about the making of a pencil).

5. There are many parables by Jesus in the Gospels of Matthew and Luke (and one in Mark) which use familiar concepts of money and economics in order to teach a deeper, more profound spiritual point. Examples are at Matthew 13:18-23 and 44-46; Matthew 18:21-35; Matthew 20:1-16 and 21:33-46; Mark 12:41-44; Luke 7:36-50; Luke 12:13-21; Luke 14:15-24; Luke 15:8-10; Luke 16:1-13 and 19-31; Luke 18:9-14; and Luke 19:11-27. Pick one of these parables and explain both the economic point and the deeper spiritual point. Extra credit: why might the Gospel of Matthew have more economic parables than the Gospel of Mark does?

Matthew 20: 1-16: If you agree to give someone a set wage, no matter how late they start on the job, you shouldn't change it just because someone else has been working for a longer amount of time. The same is true of heaven. No matter how late you are accepted into the Kingdom of God, He's not going to give the people who have been in longer more reward just because of that. (Trisha M.)

Luke 15:8-10 discusses how a single coin is so important to a woman that she is willing to sweep the whole house to find it. In the same way, God rejoices over one individual accepting Him as Lord and Savior. (Jonathan L.)

6. "Caveat emptor" or "carpe diem": pick one of these concepts and explain what it means to you.

Honors

7. Please suggest an improvement to our definition of "economics", being as creative as you like, and explain why you think your definition might be better.

8. "Money is a good servant, but a poor master." Please explain.

9. Improve on the lecture's definition of scarcity, and/or discuss the Ehrlich-Simon disagreement.

10. (Based on a true story.) Imagine that you are riding on an airplane and need to finish a written project by the time it lands in order to earn a fee of $500. The passenger next to you, however, keeps interrupting you by complaining about how she lost a $5 bill in the airport before the plane took off. You keep telling her to forget about it, but she won't. She keeps bothering you so much that you cannot get your work done, which is worth far more than $5. What would make sense in purely economic terms for you to offer to get her to stop bothering you about it? Explain.

11. "There is no such thing as a free lunch!" Discuss the concept of (economic) scarcity in the context of that saying.