Assignment 1

Professor: Hong Hwa Lee Class: Principles of Economics

1. You and your roommate are taking the same economics class. When it comes to

doing homework assignments, your roommate draws beautifully precise graphs, while you

are an extremely fast typist. Therefore, you and your roommate work on the assignments

together. Which of the 12 principles is at work here? Explain.

The first principle, I think it appears in this situation, is “Resources are scarce”.

When doing homework assignments, the time is one of the resource, that is not infinity,

it has the deadline so we have to finish them before the time. Another thing is our skill,

each of us has our individual strength in typing and drawing graphs, but we may not do

both so we have to do together.

The second one is the cost of opportunities, we give up the time of watching dramas,

movies and going out for doing assignment to get a better score and economics

knowledge. So that is the cost.

The marginal analysis also can be applied here if we view from another aspect. Our

study is very busy, we want to spend 2 hours in this economic assignment so we work

together to make it.

We take the advantage of having the roommate who are also a classmate in the

economic class, and have our own strength so it make us better off, 4th condition.

5th condition is when we do together we spend less time, so we gain more hour free.

Students’ name Students’ ID

비쿡위 : 1101433005

줄라놉 : 1101533008

아넛 : 1101533006

파자르 : 1101433003

호세페르난도바에나 : 20113213

2. At most airports there are multiple security guards ready to screen passengers, and

their luggage, through the X-ray and metal-detector checkpoints. The length of the wait for

each line is about the same. Why?

Intuitively passengers will always prefer a shorter line to a longer line. If one line

begins to short significantly, you will see some passengers switch from a longer line to the

shorter line; Passengers will continue to switch lines until there is no perceived advantage

to switching. This is the concept of equilibrium – the situation in which no individual would

be better off doing something different.

3. How would each of the following events affect the supply of compact cars? How?

a) The Price of Steel rises

The Supply Curve will be shifted to the left. It means decreasing in supply.

Steel is one of the input goods for compact cars, if its price increases, the cost for

production for compact cars will increase, and makes the producer supply few of compact

cars. So, the number of production supplies for compact cars will decrease.

b) Production technology improves.

Improving of the technology in production will affect production cost for compact

cars decreases, so producer can produce many compact car and will supply more compact

cars and supply curve will be increases, shift to the right.

S1

S2 Price

Quantity

Decrease in

Suply

c) The Price of sport-utility vehicles falls

When the price of sport-utility vehicles falls, the producer know that the profit from

sport-utility will be less. The market reached the a satiation point so they should decrease

amount of sport-utility car, and then increase the number of the compact cars. The supply

should shift to the right.

S1

S2 Price

Quantity

Increase in

Suply

S1

S2

Price

Quantity

Increase in

Suply

4. In the mid-western United States, the price of an ear of corn is always the lowest in

the summer months. This seems odd because consumers really enjoy eating ears of corn in

the summer months. Can you explain this?

Even with greater demand for corn in the summer, the supply is quite large. If the

price is low in the summer, it must be the case that the supply shift to the right is larger

than the demand shift to the right.

5. (Table: Wheat and Aluminum) Refer to the table, which shows production of wheat

and aluminum for both the United States and Germany. Are there gains from trade possible

between these nations? Explain.

Table: Wheat and Aluminum

The United States has a cost of production of 1 wheat is 1 of aluminum and Germany

has a cost of production of 1 wheat is 2 aluminum.

We can say after looking at this that The United States has a comparative advantage

producing wheat and Germany has a comparative advantage producing Aluminum. In this

situation if Germany specializes in Aluminum and trade or exchange this aluminum with

The United States the situation would result satisfactory.