1. Imagine that a high school junior received a bonus check from his boss on the
ID: 1134896 • Letter: 1
Question
1. Imagine that a high school junior received a bonus check from his boss on the last day of his summer job. He decides to save all of that bonus check to pay for his senior trip coming up next year instead of purchasing a much needed new automobile. From an economist’s perspective, which of the following statements about this decision is likely to be true?
2. Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider
minimizing the length of time it will take to complete the degree.
3.
Bob sells farm equipment in Iowa and has for twenty years. The last two months he has seen the quantity demanded for high-end tractors decrease by 35% compared to the same time last year. What is a possible explanation for events that have shifted the demand curve?
4.
A major hurricane is headed towards Southern Florida and as a result panic buying has set in. What would you conclude about the third step of the four step process in this example?
The decision must have been made haphazardly and is therefore irrational.Explanation / Answer
1. Savingall of that bonus check to pay for his senior trip coming up next year instead of purchasing a much needed new automobile will be considered irrational and not an optimal use of the available resources. The correct option should be "the decision is irrational because anyone can see that choosing a high school trip over a much needed new automobile is an improper use of scarce resource".
2. While considering which major to choose Marcus should consider both the cost and benefits from the degree. The correct option should be "benefit each major would bring and the cost of the degree".
3. The shift in the demand for tractor can only happen by change in factors other than own price of tractors. The factor which may have decreased the demand for tractors here will be "the income of the consumers must have decreased.
4. Sudden or panic buying will increase the current demand and thus demand curve will shift rightwards. The new erquilibrium price and quantity will therefore be higher than the original equilibrium.
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