Discuss how economics impacts your own life.
After going through the author’s 10 Principles of Economics, give an example or two of how you might apply these principles to your own life and your own decision making.
Think about:
What are some trade offs you have had to make? What has been the opportunity cost of making those tradeoffs? How have you thought on the margin in the past? What incentives have you responded to?
How has trade made your life better/worse off? How have you experienced the “invisible hand”? Has the actions of government improved your life more than the market?
Full Answer Section
Invisible hand: I have experienced the invisible hand in my own life. For example, I have benefited from the fact that businesses have competed to provide me with goods and services at a low price.
Government: The actions of government have also impacted my life. For example, the government has provided me with education and healthcare.
Here are some specific examples of how I have applied the 10 Principles of Economics to my own life:
- Principle 1: People face trade-offs: I have to make tradeoffs between different goals, such as spending time with friends and studying for exams.
- Principle 2: The cost of something is what you give up to get it: The opportunity cost of studying for an exam is the fun I would have had with my friends.
- Principle 3: Rational people think at the margin: I often think about the marginal cost and benefit of different decisions, such as whether to buy a coffee at Starbucks.
- Principle 4: People respond to incentives: I am more likely to study for an exam if I know that there is a reward for doing well.
- Principle 5: Trade can make everyone better off: I have benefited from trade by being able to buy goods and services that are not produced in my country.
- Principle 6: Markets are usually a good way to organize economic activity: Businesses have competed to provide me with goods and services at a low price.
- Principle 7: Governments can sometimes improve market outcomes: The government has provided me with education and healthcare.
- Principle 8: A country's economic growth depends on its ability to produce goods and services: The United States has a strong economy because it is able to produce a wide variety of goods and services.
- Principle 9: Prices rise when the government prints too much money: Inflation can make it harder for people to afford goods and services.
- Principle 10: The economy is self-correcting: The economy will eventually adjust to shocks and return to normal.
I believe that economics is a valuable tool for understanding the world around us. It can help us make better decisions in our own lives and it can help us to understand the policies that governments make.
Sample Answer
Economics impacts my own life in many ways. Here are some examples:
- Tradeoffs: I make tradeoffs every day. For example, I might decide to spend my time studying for an exam instead of going out with friends. The opportunity cost of studying is the fun I would have had with my friends.
- Marginal thinking: I often think on the margin. For example, I might decide to buy a coffee at Starbucks, but I might also consider making coffee at home. The marginal cost of buying coffee at Starbucks is the difference between the price of the coffee and the cost of making coffee at home.
- Incentives: I respond to incentives all the time. For example, I might be more likely to study for an exam if I know that there is a reward for doing well.
Trade: Trade has made my life better in many ways. For example, I can buy goods and services that are not produced in my country. I can also travel to other countries and experience different cultures.