Question

1) What is a tradeoff you face in your daily life? An example of a tradeoff would be living in the city vs. living in the suburbs. (You are not allowed to use this one.)

2) What is the scarce resource in your tradeoff (from Question #1) that forces you to chose one or the other (reason you can't choose both)? An example of a scarce resource when deciding between living in the city vs. living in the suburbs could be commute time. If you work and live in the city, you will have a shorter commute time. As oppose to working in the city and living in the suburbs, you will have a much longer commute time. Is it worth the commute?

3) When considering the Circular Flow diagram, name a way that your family interacts in the "Factors of Production" market and a way that it interacts in the "Goods and Services" market.

I look forward to learning more about you by showing you how these Economic topics can apply to your life.

Answer 1

1) The word tradeoff simply refers to compromise , it is a decision made between close alternatives . The most common tradeoff that we make in daily life is between work and leisure . Let us take the example of a wage earning person who gets paid on an hourly basis . The more hours he works the more payment he gets . But at a certain point the opportunity cost of working becomes too high because leisure or rest is also important for maintaining health and efficiency . The trade off between working hours and leisure hours is done . Taking extra leisure means loss of money and working too much means deteriorating health conditions .

2)The scarce resource here is time . The time per day is fixed . The hour lost in leisure will not fetch income . So daily time has to be divided optimally between labor and leisure . In 24 hours we cannot choose 20 hours of work and 10 hours of leisure , so if we want to work for 20 hours we are forced to choose 4 hours of leisure only . Also spending extra hours in leisure may not be worth it as money is lost .

3) In my family there are working people who work for private organizations , thus providing labor in Factors of Production market . They get wages from firms which is a flow of money from firm to household .

My family buys monthly groceries from a shopping mart . We get the goods we require and pay for them . This is interaction in Goods and Services market . We get the products from various firms producing them and pay for those products . Flow of money from household to firm .