The Economic Way of Thinking
You have only 2 hours tonight and must choose between studying and watching a movie. Economists call this situation a
What is a trade-off?
“The government should just print more money so everyone can be richer.” What major problem does this argument ignore?
What is inflation / the loss of purchasing power?
Why do stores often place small snacks and candy near the checkout counter?
What is to encourage impulse buying?
According to the syllabus, what is worth more: Exam 1 or Exam 2?
What is the highest grade, regardless of which exam?
A café lowers coffee prices and suddenly sells many more cups. This illustrates this relationship
What is demand?
Economists usually assume people respond to changes in rewards and penalties. These are called
What are incentives?
“If something is free, it has no cost.” Economists would say this ignores
What is opportunity cost?
Restaurants often put an expensive item on the menu partly to make other dishes look more reasonably priced. This is related to this behavioral concept.
What is anchoring?
What is one thing that can earn you an automatic zero according to the syllabus?
What is academic dishonesty / plagiarism?
Taylor Swift announces a concert in Yerevan, but the arena has only 10,000 seats. Tickets become extremely expensive. This economic concept is at work
What is scarcity?
A rational decision-maker should compare the additional benefit of one more unit with the additional cost. Economists call this thinking
What is thinking at the margin / marginal analysis?
“Rent should be capped very low so everyone can afford an apartment.” What possible unintended consequence might an economist mention?
What is a housing shortage / reduced rental supply?
People often value an object more once they own it than they would have paid to acquire it. This behavioral economics effect is called
What is the endowment effect?
A student says, “I’ll just do well on the exams and ignore everything else.” According to the grading breakdown in the syllabus, why might that strategy fail?
Because the final grade includes other components such as participation, assignments, quizzes, etc.
Restaurants are completely full on Valentine's Day and charge more than on an ordinary Tuesday. This demonstrates how this mechanism helps allocate scarce resources.
What is price?
You have already spent $100 on a course you hate. Continuing only because you already paid is an example of this mistake.
What is the sunk-cost fallacy?
“If a company makes a large profit, consumers must be losing.” Why is this statement economically weak?
Because voluntary exchange can make both buyers and sellers better off.
Why can giving people too many choices sometimes make them less likely to buy anything?
What is choice overload?
Besides teaching at AUA, where does your professor work (at which institution) and what is his role there?
What is CBA as a researcher?
Uber prices rise dramatically during a rainstorm. In economic terms, the higher price is responding to this combination.
Higher demand and/or limited supply.
A policy produces benefits of $10 million but also creates costs of $8 million. An economist would evaluate the policy primarily by comparing what two things?
What are marginal/social benefits and marginal/social costs?
“Automation destroys jobs, therefore technological progress makes society poorer.” What important economic adjustment does this claim overlook?
What is that technology also creates new jobs, raises productivity, and changes relative prices and demand?
A famous economics example suggests that paying parents a small fine for picking children up late from daycare can actually increase lateness. Why?
Because the fine can turn a social obligation into a price people are willing to pay.
Your professor’s research has covered financial education, digital banking, fraud, and over-indebtedness. What common question connects all of these topics?
What is how people make financial decisions?
Why might a city’s traffic get worse after it builds a new road or adds more lanes?
What is induced demand — easier driving encourages more people to drive, which can bring congestion back?