1. Explain how each of the following situations illustrates one of the four principles of individual choice.
You are on your third trip to a restaurant’s all-you-can-eat dessert buffet and are feeling very full. Although it would cost you no additional money, you forgo a slice of coconut cream pie but have a slice of chocolate cake.
This illustrates the concept of opportunity cost. Given that a person can only eat so much at one sitting, having a slice of chocolate cake requires that you forgo eating something else, such as a slice of coconut cream pie.
Even if there were more resources in the world, there would still be scarcity.
This illustrates the concept that resources are scarce. Even if there were more resources in the world, the total amount of those resources would be limited. As a result, scarcity would still arise. For there to be no scarcity, there would have to be unlimited amounts of everything (including unlimited time in a human life), which is clearly impossible.
Different teaching assistants teach several Economics 101 tutorials. Those taught by the teaching assistants with the best reputations fill up quickly, with spaces left unfilled in the ones taught by assistants with poor reputations.
This illustrates the concept that people usually exploit opportunities to make themselves better off. Students will seek to make themselves better off by signing up for the tutorials of teaching assistants with good reputations and avoiding those teaching assistants with poor reputations. It also illustrates the concept that resources are scarce. If there were unlimited spaces in tutorials with good teaching assistants, they would not fill up.
To decide how many hours per week to exercise, you compare the health benefits of one more hour of exercise to the effect on your grades of one less hour spent studying.
This illustrates the concept of marginal analysis. Your decision about allocating your time is a “how much” decision: how much time spent exercising versus how much time spent studying. You make your decision by comparing the benefit of an additional hour of exercising to its cost, the effect on your grades of one less hour spent studying.