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Chapter 1: Q 11. (page 25)

What are three reasons to study economics?

Short Answer

Expert verified

The three reasons to study economics are:

  1. Rational behavior of people
  2. Making better policy decisions
  3. Making an efficient thinker.

Step by step solution

01

Step 1. Meaning of Economics.

Economics is the study of how humans make decisions in the face of scarcity. It is about making choices and studying the impact of the choices on each other. It includes individual decisions, family decisions, business decisions, or societal decisions.

02

Step 2. The three reasons to study economics.

The three reasons to study economics are:

i. Rational behavior of people

Economics assumes that people are rational they perform activities that maximize their utility.

ii. Making better policy decisions.

Economics helps in choosing the best policy among the various alternatives and improves our decision-making skills.

iii. Making an efficient thinker

The knowledge of economics makes us knowledgeable thinkers. It helps us in making decisions like what to produce, how to produce, and for whom to produce.

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Most popular questions from this chapter

Can you think of any examples of free goods, that

is, goods or services that are not scarce?

If a central bank uses the tools of monetary policy to reduce the demand for goods and services, the likely result is __ inflation and __ unemployment in the short run.

  1. Lower; lower
  2. Lower; higher
  3. Higher; higher
  4. Higher; lower

Suppose America decide to save more of their incomes. If banks lend this extra saving to business that use the funds to build new factories, how might this lead to faster growth in productivity? Who do you suppose benefits from higher productivity? Is society getting a free lunch?

A consultant works for $200per hour. She likes to eat vegetables, but is not very good at growing them. Why does it make more economic sense for her to spend her time at the consulting job and shop for her vegetables?

Are firms primarily buyers or sellers in the goods and services market? In the labor market?
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