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Marginal analysis, sunk cost, choice

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1) What determines whether a resource is scarce? Why is the concept of scarcity important to the definition of economics?

2) (Marginal analysis) The owner of a pizzeria is deciding whether to increase the radius of the delivery area by one mile. What considerations must be taken into account if such a decision is to increase profitability?

**using the relationship between choice an opportunity cost for question 3-4
3) (Sunk cost and choice) Suppose you to a restaurant and buy an expensive meal. Halfway through, despite feeling quite full you decide to clean your plate. After all, you think you paid for the meal so you are going to eat ALL of it. What is wrong with this thinking?

4) (Opportunity cost) You can either spend spring break at home working for $80 per day for 5 days or go to Florida for a week. If you stay home, your expenses for the week will be $100 if you go to Florida total cost will be around $700. What is your opportunity cost for going to Florida?

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Solution Summary

1) What determines whether a resource is scarce? Why is the concept of scarcity important to the definition of economics?

2) (Marginal analysis) The owner of a pizzeria is deciding whether to increase the radius of the delivery area by one mile. What considerations must be taken into account if such a decision is to increase profitability?

**using the relationship between choice an opportunity cost for question 3-4
3) (Sunk cost and choice) Suppose you to a restaurant and buy an expensive meal. Halfway through, despite feeling quite full you decide to clean your plate. After all, you think you paid for the meal so you are going to eat ALL of it. What is wrong with this thinking?

4) (Opportunity cost) You can either spend spring break at home working for $80 per day for 5 days or go to Florida for a week. If you stay home, your expenses for the week will be $100 if you go to Florida total cost will be around $700. What is your opportunity cost for going to Florida?

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Section 1:
A resource is termed to be 'scarce' if the demand for the resource exceeds the supply of the goods at zero prices. In other words, if the demand for a resource exceeds the supply at zero prices, then people will be more than willing to pay a higher price resulting in a positive market price (the point where the supply and demand curves meet). Simply put, a positive market price signals scarcity of a resource. Economics involves the study of choices made by society or an individual. Scarcity as a concept is key to economics as it ...

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