Answer:
The correct answer is d. Different economic models employ different sets of assumptions.
Explanation:
To approach the study of economic reality it is necessary, in some way, to simplify it; keep certain variables under control. Precisely for this, it is that economic models are built.
Economic models are built on principles of departure, called "assumptions." Such assumptions fulfill the same role as the postulates in geometry. That is:
- They are not subject to deduction from other more basic principles.
- They are "reasonably" true but not necessarily verifiable.
- They function as premises in the logical structure to deduce the conclusions and correlations found in the lowest levels of generality.
We can say then, that the theoretical explanations refer to invisible "relationships", whose existence is proposed by the theory, and whose implications are logically deduced, and then corroborated by observations. They consist of:
- Assumptions (eg subjects want to maximize their earnings).
- Relevant variables (eg price and quantity).
- Binding hypothesis (eg quantity demanded based on price).
- Conclusions or predictions of observable facts (eg prices will rise).
If your a busy small business owner, taking time away from your store makes you less efficient. The trade offs for using this premium service are 1. your spending more money 2. control over quality. Vise versa if your paying more for the “best groceries” then that may not be an issue. Also be aware that another issue is stocking, going to the store yourself does not guarantee that the store will have all items in stock when you go. 3. Time, taking time to grocery shop takes away from your business or the cost of an employee to watch the business or do the shopping for you having you rely on a third party’s judgment. 4. Gas, the cost of gasoline to go to and from the store. If all these are added up then you are essentially paying more for your “in person” groceries as it is. Choosing to grocery shop yourself saves you money (although how much? Once everything is taken into account?) but again the time it takes away is significant. For a busy small business owner time is extremely important and this is why the trade off of cost or added expenses for groceries may be worth it. (I hope this helps guide you in answering this question).
Answer:
Leads the economy to the wrong mix of output
Explanation:
Market failure is the when there is an inefficient distribution of goods and services in the free market.
One of the types of market failure is externality
Externality is when the production or consumption activities of economic agents have effects on people not involved in the economic activity. Externality can either be positive or negative
A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.
A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation
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