Question

WEEK 1: ECONOMIC THINKING AND ECONOMIC SYSTEMS

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INITIAL POST (UP TO 10 POINTS)

Why do we make choices? Is being rich or poor a choice? Is living healthy or unhealthy a choice? What about having kids? Is that a calculated choice or simply an accident? Why do rural areas have typically calmer and nicer people than cities where you find a mix of professionals and difficult people? Why do you bother wrapping your friend's gift knowing that the wrapping paper is going to be thrown away? Does going to school make sense? How do you know?

These are among countless questions that could be answered through understanding the economics way of thinking. Economists do nothing but watch how the world, including people, work and make calculated assumptions to help the world become a better place.

For your initial post, answer one of the following questions.

1. Share with us an example from your life where you had to make a choice knowing that you are giving up opportunities for doing or gaining something else. Tell us about your thinking process and how you arrived at the final choice you made. Would you make the same choice again?
2. Moreover, why do consumers make choices when they acquire something (jobs, money, friends, vacations, sleep, living places, etc.)? And why do individual producers or nations have to choose the type, quality, and quantity of what they produce?

MULTIMEDIA POST (UP TO 15 POINTS)

Create a short, 1- to 2-minute slide presentation with a voice narration or a video using any technology you are comfortable with to explain one of the economic concepts listed below. Suggestions include creating an Adobe Spark Page (Links to an external site.)Links to an external site. with a Spark Video, Kaltura video post, or a narrated PowerPoint.  

Start the presentation by introducing yourself (name and your topic of choice), and then give a brief explanation of at least one of the concepts listed below, including an example to support your presentation.

• Opportunity cost
• Trade off
• Scarcity
• Economic problem
• Self-interested versus selfish
• Production possibilities frontier
• Budget line
• Utility
• Economic growth
• The market system and the command system
• Specialization
• The circular flow

Answer 1

Example from Life: Economics deals with the allocation of scarce resources efficiently. One of the most scarce resources in our lives is the total amount of time we have, Time spent in doing activity A implies the time spent in not doing activity B. So there is always a trade-off associated with our decisions.

In my life, I had to choose between the trade-off between money and happiness. I was employed in a high-paying job which gave me a sufficient amount of money to fulfill all my needs. However, I was not happy with the kind of work I was doing. So, money gave me positive utility by making other commodities affordable to me, but the opportunity cost of this was the amount of mental peace and happiness I had to give up. Initially, I had no money so the utility from money outweighed the disutility of not being money. However, after I had saved some money, the marginal utility of money decreased for me. After a certain point, my disutility from happiness dominated my utility from money. At that moment I decided to give up my job and start looking for something that I love instead. So this is how I arrived at my final choice and left the job. If I find myself in a similar situation, I would make the same choice again. However, if for some external shock I am in dire need of money, then money will become a priority over my happiness and the marginal utility of money will also increase rapidly. In such a scenario, I may not go back to the same choice.

Consumers have to make choices since resources are scarce. While buying goods from the market, consumers make choices since the amount of budget they have is constant. They cannot buy everything. So they need to choose which good to buy. Similarly, the amount of time available is constant. So, the consumer must decide whether to sleep or to work during the given time.

The produces and nations have the objective to maximize the profit. So they cannot just randomly choose whatever quantity they want to produce. The production decisions are constrained by budget, investments, market demand, number of competitors, etc. If the market demand is high, the producers will choose a higher quantity to maximize profit as opposed to lower market demand. If there are too many competitors in the market, producers will try to improve the quality of their products to increase sale. So, the producers must choose these decisions.