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# How does economics effect our lives?

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1. Suppose you were having lunch with your best friend who just enrolled in an economics class. He/she was complaining about how irrelevant the class was, commenting they saw no useful purpose for economics. According to your friend, â??Iâ??m a nursing major. I will never use this stuff in the real world." Having just completed the same course in economics, you try to explain to your friend that economics affects everyone! How would you explain to this person that economics is a daily part of his/her personal and professional lives? Use at least 3 examples of micro and macro economics in your response.

2. As the text indicates, there is a difference between a change in demand (or supply) and a change in quantity demanded (or quantity supplied). Answer the questions below and indicate in each of your answers if the resulting changes are changes in the quantity demanded (or supplied) or changes in demand (or supply).

A. Identify at least three determinants of demand and three determinants of supply, using one example for each determinant. For each determinant, describe what happens to the demand and/or supply curves if one of these determinants changes.
B. What happens to Supply and Demand if only price changes in the market?

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#### Solution Preview

1. Three examples of how economics affect daily life.

examples one, consider the concept of "opportunity cost", which you may use to assign monetary values to activities/object which are not priced.

Opportunity cost means that in order to do something, you must give up something else (usually in the form of time). For example, college tuition is \$5000/year. So does that mean if I decided to attend college, then I value one year of college education to be greater than \$5000 (in economics, we believe people take action if they thinks that the benefit is greater than the cost)? If you add the cost of time, you will see that one year of college education is much greater than \$5000. Let me now ask "what would you do if you decided not to go to college?" Say if you can go work at McDonald's for \$20000/year. Here you can see that by going to college, your cost is \$5000 tuition + \$20000 (opportunities cost) which is \$25000, this means that you value college education to be at least greater than \$25000/year.

example two, the concept of sunk cost

Let us consider such a situation. You got a concert ...

\$2.19