Graphic Organizer for the “Economizing Problem”- The need to make choices because economic wants exceed economic means

“It's easy to sit there and say you'd like to have more money. And I guess that's what I like about it. It's easy. Just sitting there, rocking back and forth, wanting that money.” - Deep Thoughts (Saturday Night Live)

Issue #1: Limited Income Issue #2: Unlimited Wants Solution: Budget Line

Trade-offs, Opportunity Costs, Choice, and Income Changes

Practice Questions:

The diagram above shows the demand and supply curves for a normal good.The equilibrium price could rise from P1 to P2 ifA Consumers’ incomes increasedB P2 were set as a legal maximumC Subsidies on the production increasedD the price of a complementary product increasedE costs of production were substantially lowered

Assume that a consumer spends all her income on the purchaseof two goods. If the consumer’s income doubles and the prices ofthe two goods also double, the quantity of the two goods purchasedwillA Also doubleB More than doubleC Increase, but it will be less than doubleD Not changeE depend on the slope of the demand curve

According to the graph above, if a country is currently producing at point X, the opportunity cost of producing another consumer good isA 20 capital goodsB More than 20 capital goodsC. Fewer than 20 capital goodsD. 20 consumer goodsE Fewer than 20 consumer goods

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because:

A. people are greedy.B. productive resources are limited.C. human beings are inherently insecure.D. people are irrational.