Econ 1000 chapter 4 question
1. We need methods of allocating resources because we need an efficient and fair
method of distribution of our scarce resources. And to maintain order while
distributing the resource.
2. Personal preference such as will and gifts. Resources are transferred through
personal reasons and likings and are uninfluenced by other factors such as legal
3. Market price – such as when a company introduces a product and reach mutual
benefit with the consumers. The maximum supplied and maximum earned and to
restrict demand. Command – a ceo orders subordinates to execute a mission.
Majority rule – elections. Contest – eating contest for iPod. First come first serve
– hospital emergencies. Lottery – super 7. Personal characteristics – job search
with education and experience requirements. Force – law enforcements.
4. Market price – monopoly. Command – tyranny. Majority rule – uninformed public.
Contest – cheating. First come first serve – hospital where there are levels of
emergency. Lottery – money laundry. Personal characteristics – discrimination
and racism. Force – laws enforced through bribery.
5. We measure the value or marginal benefit of a good or service through the
demand curve. It shows what we are willing to pay for a particular item and how
much its worth to us.
6. The consumer surplus is the amount saved by purchasing the good at a
particular amount. For example initially we would pay 4 dollars for a price of
pizza but when we buy 2 its worth 2 dollars. And thus the surplus is the area
above the price we paid for the pizza and the area under would be the price we
actually spent on the pizza.
7. The marginal cost is the cost incurred to produce an additional unit, the minimum
supply-price is the price charged to compensate for the cost to make profit.
Supply is the ability and cost efficiency to produce and item.
8. The producer’s surplus is the amount earned as the productions