Week 1 Discussion
Cost-Benefit Principle
On what basis do you make economic decisions? One potential approach is to employ the cost-benefit principle, which suggests engaging only in those actions that create an economic surplus. Considering other criteria such as opportunity costs helps you to make a rational choice. For example, when budget crises occur, local or national governments may opt to cut back on critical programs, while many others may consider raising taxes.
Post by Day 3 a 250- to 300-word statement that addresses the following:
What are the opportunity costs of reducing expenditures (such as on education and social services programs), compared to the option of raising taxes? Why?
Explain what you think are the rational choices in such a situation, and what other options should be considered and why.
Read a selection of your colleagues’ postings.
Respond by Day 6 to two or more of your colleagues’ postings in one or more of the following ways:
Ask a probing question.
Share an insight from having read your colleague’s posting.
Offer and support an opinion.
Make a suggestion.
Expand on your colleague’s posting.
Return to this Discussion in a few days to read the responses to your initial posting. Note what you learned and the insights you gained as a result of the comments your colleagues made.
Be sure to support your work with specific citations from the Learning Resources and any additional sources.
Required Resources
Readings
Frank, R. H., & Bernanke, B. S. (2010). Principles of microeconomics, brief edition (2nd ed.). New York, NY: McGraw-Hill/Irwin.
Chapter 1, “Thinking Like an Economist” (pp. 3–33)
Chapter 1 introduces the concept of scarcity and presents the unavoidable fact that our needs and wants are unlimited and that the resources available to satisfy them are limited. The chapter also explains that, in an environment of scarcity, making choices on the basis of a comparison of costs and benefits is a useful approach to decision making.
Focus on the inputs to the process of comparing costs and benefits. In addition, review the appendix, “Working with Equations, Graphs, and Tables.” This appendix provides a review of some of the mathematical skills you need to use in this course.
Media
Kahn Academy. (2014k). Marginal utility [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/marginal-utility-tutorial/v/marginal-utility
Note: The approximate length of this media piece is 12 minutes.
Kahn Academy. (2014e). Equalizing marginal utility per dollar spent [Video file]. Retrieved from https://www.khanacademy.org/economics-finance-domain/microeconomics/choices-opp-cost-tutorial/marginal-utility-tutorial/v/equalizing-marginal-utility-per-dollar-spent
