Lam Khai Anh Thu-FNC02

Micro economics

Homework 1: What is Economics?

1.Describe an important trade-off you recently faced. Give an example of some action that has both
a monetary and non-monetary opportunity cost. Describe an incentive your parents offered to you
in an effort to influence your behavior.

-Back to high school years, especially in grade 12, that was a hard time for me cause the schedule
occupied almost my time, I just go to school and extra classes. I didn’t have spare time to join in clubs
or outdoor exercises much. Although I got good score by spending time for learning and practicing, I
still feel under pressure and lack of social communication skills compare with my friends.

-go to the university is an example . Recently, the price of courses is much expensive than before, but
consider to the benefits it brings, I can say that’s reasonable. You have to pay money- that’s a
monetary opportunity cost, spend at least haft of your time daily at the university for lectures- non-
monetary cost.

-my dad told me that whether I got high score in the entrance exam to the university, he would
reward me a laptop and a trip to Phan Thiet.

2.Why is a country better off not isolating itself from all other countries? Why do we have markets,
and according to economists, what roles should government play in them?

- A country isolating itself from others means that it has to produce vary types of products at many
aspects such as farming, sewing or building,… and of course that way takes times, resources,
knowledge or even that country is unable to do numerous of duties like that. So they need the ability
to trade with another country. Not only it allows country to specialize their forte but also to enjoy
variety of goods and services.

-the trade or interaction for goods and services of firms and household as well as their decentralized
decisions about the price of products which gradually come into being market economy.

- according to economists, government has obligation to enforce rights and maintain institutions,
promulgate policy which allow civil defend their rights over the things they create. Moreover, the
intervention of government in economy is to promote efficiency or equality, which unduly influence
the distribution of economic well-being.

3. In what ways is your standard of living different from that of your parents or grandparents when
they were your age? Why have these changes occurred?

In my term of generation, everything has developed so far compare to the pass, even the world is
modernized every second. Specifically ,vary types of products manufactured and sold in the market
with several models, prices, versions in order to satisfy consumers every class. People tend to work
harder as make much money to award themselves the things change their life better, enjoy luxury
services,… According to that, the standard of living nowadays is way more diverse and require higher
quality than before.
4.List and briefly explain the three principles that describe how the economy as a whole works.

- a country’s standard of living depends on its ability to produce goods and services: which means the
productivity of a country. Regarding to how to raise the productivity, policymakers have to care about
technological knowledge; human capital as ensure that workers are well educated and trained;
physical capital even so the investment ; natural resources.

- price rise when the government prints too much money: large quantity of money occurs in
circulation reduces the value of currency. Imagine instead of paying 10,000 VND per a banh mi in the
pass, now it goes up to 15,000 VND. Just with that banh mi, the size or ingredients are not different
much but you have to bring more money to buy it. If the inflation isn’t solved in a short-term, it will
leave consequences lead to the recession of the nation’s economy.

-society faced a short-run trade-off between inflation and unemployment: more money created-> rise
spending and demand of goods and services-> firms raise their prices. Parallel to that, more hiring
workers means lower unemployment.

5. Name a way that your family interacts in the factor market and a way that it interacts in the
product market.

-in market for goods and services: In the product market, my family is buyer, and firms are sellers. In
particular, my family buy the output of goods and services that firms produce. For example my family
pay for the electricity we use so we are the buyers, and the electricity company is the seller.

- in market for the factors of production: In the factor market, my family is seller, and firms are
buyers. In these markets, my family provides the inputs that firms use to produce goods and services.
My dad works for a cement company, so he sells his labor as human capital and the company pay
wages for him.

6. In what sense is economics like a science? In a production possibilities frontier for a society that
produces food and clothing. Define an efficient point, an inefficient point, and an infeasible point?

-considering at the science side, we have something called positive economics to describe, explain the
world as it is, whether it is objective and can be confirmed or reputed. After a long term of time that
observation conducted and come up with assumption, we have the model to tested. If the
observation supported then theory occurred, if it not, so there is nothing to conclusion.

-inefficient point: resources are not fully and efficiently used

-efficient point: the way of producing more of one good is to produce less of the other.

-infeasible point: resources are not enough to produce the level of output.

7. Give an example of a positive statement and an example of a normative statement that

somehow relates to your daily life. Name three parts of government that regularly rely on advice
from economists.

-positive statement: reducing the price of gasoline densely impact the profit of private gas station.

-normative statement: Most healthcare should be provided free at the point of use.
-3 parts of government rely on advice form economists: the president; congress; the federal reserve.

8.Why might economic advisers disagree about a question of policy?

Because their sights in scientific judgments are totally distinctive and even the value they own related
to each normative views about government policy. Sometimes economists give conflicting advice or
often disagree for same reason. Having said that, economists agree with others to a much greater
extent than is sometime understood. Nonetheless, many city governments ignore the advice of
economists.