ECONOMIC DETECTIVE
A billionaire can afford many things but cannot attend two events in different cities at the same time. Which economic problem does this illustrate? Explain.
Scarcity. Time is limited, even for wealthy people, so they must make choices.
You spend an evening watching a film instead of preparing for an exam. What is the opportunity cost if studying was your best alternative?
The benefit you could have gained from studying, such as better understanding or improved exam preparation.
Your first slice of pizza is very satisfying. Your fifth slice adds much less satisfaction. Which economic principle does this illustrate?
Diminishing marginal utility: additional units provide less extra satisfaction as consumption increases.
Coffee becomes more expensive. Tea is a substitute for coffee. Holding other factors constant, what happens to demand for tea?
Demand for tea increases. Its demand curve shifts to the right.
“Economics is only about money.” Identify the mistake and give one economic decision that does not require a money payment.
Economics studies choices and the allocation of scarce resources, including time. Example: choosing whether to study, sleep, or spend time with friends.
A university café uses coffee beans, a coffee machine, a barista, and an owner who organises the business. Identify an example of labour, capital, and entrepreneurship.
Labour: the barista’s work. Capital: the coffee machine. Entrepreneurship: organising the business and taking business risks.
You can accept only one job tonight. Job A pays 100,000 UZS, Job B pays 160,000 UZS, and Job C pays 130,000 UZS. All take the same time and have no other costs. You choose Job B. What is your opportunity cost?
130,000 UZS: the income from Job C, the best alternative forgone.
Three cups of tea provide total utility of 45 units. Four cups provide 52 units. What is the marginal utility of the fourth cup?
7 utility units: 52 − 45.
Flour becomes more expensive, but the selling price of bread stays unchanged. What happens to the supply of bread, other things equal? Explain.
Supply decreases because production costs rise. The supply curve shifts left.
“When a product’s own price falls, its demand curve shifts to the right.” Correct this statement.
Other things equal, a fall in the product’s own price causes an increase in quantity demanded: a movement along the existing demand curve.
A university opens a free gym, but students must wait an hour to enter. Is using the gym economically costless? Identify the main cost.
No. The time spent waiting has an opportunity cost: the value of the best alternative use of that time.
A workshop costs 50,000 UZS, and additional transport costs 20,000 UZS. Attending means giving up a job that would pay 150,000 UZS net. What is the total economic cost of attending?
220,000 UZS = 50,000 + 20,000 + 150,000.
You value the first, second, third, and fourth sandwiches at 30,000, 24,000, 18,000, and 10,000 UZS respectively. Each costs 15,000 UZS. Your budget is sufficient. How many should you buy, and why?
Three. The first three sandwiches have marginal benefits above their price. The fourth adds only 10,000 UZS of benefit but costs 15,000 UZS.
At the current price, buyers want 120 tickets, but sellers offer only 80. Identify the imbalance, calculate its size, and explain the pressure on price if prices can adjust.
A shortage of 40 tickets. Competition among buyers creates upward pressure on price.
“Our revenue increased, so our profit must have increased.” Is this necessarily true? Give a numerical counterexample.
No. Costs may rise by more than revenue. For example, revenue rises from 100 to 120, while costs rise from 70 to 100. Profit falls from 30 to 20. Accept any valid counterexample.
“Bus fares increased by 20%, so the government should make public transport free.” Identify the positive statement and the normative statement.
“Bus fares increased by 20%” is positive: it can be checked using evidence. “The government should make public transport free” is normative: it expresses a judgement about what should happen.
A business earns 12 million UZS per month and pays 8 million in explicit costs. Its owner could earn 3 million elsewhere during the same working hours. There are no other implicit costs. Calculate accounting profit and economic profit.
Accounting profit: 12 − 8 = 4 million UZS.
Economic profit: 12 − 8 − 3 = 1 million UZS.
An extra study hour is expected to improve your test result by 5 points. However, losing that hour of sleep is expected to reduce your result by 7 points. Considering only these effects, should you study longer? Explain using marginal reasoning.
No. The expected marginal cost exceeds the marginal benefit. The net expected effect is 5 − 7 = −2 points.
Demand is Qd = 120 − 2P and supply is Qs = 20 + 3P. P is in thousand UZS. Find the equilibrium price and quantity.
120 − 2P = 20 + 3P. Therefore P = 20 and Q = 80. Equilibrium price is 20,000 UZS; equilibrium quantity is 80 units.
“I paid 200,000 UZS for a non-refundable ticket, so I must attend even though I would now benefit more from staying home.” What is wrong with this reasoning?
The ticket payment is a sunk cost and cannot be recovered under either choice. The decision should compare the remaining benefits and costs of attending with those of staying home.
A city prints twice as much money, but the number of homes, doctors, buses, and food supplies stays unchanged. Has the city solved scarcity? Explain without simply saying “inflation.”
No. More money does not itself create more real goods, services, or productive resources. People still compete for limited resources, so choices and trade-offs remain.
In one hour, Ali can make 8 slides or translate 4 pages. Sara can make 6 slides or translate 6 pages. Assume constant production rates. Who has the comparative advantage in each task? Support your answer with opportunity costs.
Ali has the comparative advantage in slides: one slide costs him 0.5 translated pages, compared with 1 page for Sara. Sara has the comparative advantage in translation: one page costs her 1 slide, compared with 2 slides for Ali.
A café can stay open for up to three extra hours, in order. Additional revenue is 180,000, 140,000, and 90,000 UZS. Additional cost is 80,000, 100,000, and 120,000 UZS. How many extra hours maximise additional profit? Calculate that profit.
Two hours. Hourly profit changes are +100,000, +40,000, and −30,000 UZS. Two hours generate the highest additional profit: 140,000 UZS.
Initially, Qd = 120 − 2P and Qs = 2P. Demand then increases to Qd = 160 − 2P, while supply stays unchanged. Calculate both equilibria. What shortage appears if the price temporarily stays at its original level?
Initial equilibrium: P = 30, Q = 60.
New equilibrium: P = 40, Q = 80.
At the old price of 30, new quantity demanded is 100 and quantity supplied is 60: a shortage of 40 units. Prices are in thousand UZS.
“We should produce as many units as possible because every unit adds revenue.” Each unit sells for 40,000 UZS. The marginal costs of five successive units are 10,000, 20,000, 30,000, 50,000, and 60,000 UZS. There are no fixed costs. Correct the argument and find the profit-maximising quantity and profit.
Additional revenue alone is not enough; it must be compared with additional cost. Produce three units. Revenue = 120,000 UZS; cost = 60,000 UZS; profit = 60,000 UZS. The fourth and fifth units would reduce profit.