Unit 1 Discussion DISCUSSION PART 1: Getting Started Opportunity Cost is an incredibly important concept in economics. To think like an economist (even if you aren’t planning on being one in life), you need to think at the margin. To help you personalize the concept, think about the marginal cost and marginal benefit of studying one more hour for an exam. Ok, so you probably aren’t thinking “marginal cost and marginal benefit” when you decide whether to study, but you still make a choice of whether to study that extra hour or not. Why, therefore, must you ultimately take into account your opportunity cost for an extra hour spent studying or, for that matter, pursuing any particular activity if you want to make rational decision about what to do with your scarce time? DISCUSSION PART 2: Digging Deeper 1. Per capita income varies substantially across the country. If there were a free market in which payments for kidneys were permitted within the United States, would you expect there to be different prices in different parts of the country? Thinking in terms of opportunity cost, would there be an “organ export” market in which organs are sold by one group and bought by another (all within the US)? Your answer should include price elasticity of demand and supply. 2. Consider the issue of rent control for rental units/apartments. Who, other than the owners of rental units, loses as a result of rent price controls? Who gains from rent controls? What effect would the imposition of rent controls have on the market price of an existing single family house? What effect would rent controls have on the value of vacant land? Include the concepts of opportunity cost and price elasticity in your answer.
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