Academic Master

Economics

Economic Discussion Questions

Q.1 “Which do you think has a greater effect on the consumer price index: a 10 per cent increase in the price of chicken or a 10 per cent increase in the price of caviar? Why?” What do you think and why?

A price change for Caviar, as compared to Chicken, will not have as significant of an effect on the demand for Caviar in the market or its purchase having any impact on it as a price change for Chicken will. A $ 10 price rise for Chicken will have a high impact since it is considered a daily purchasable item for an average family (Samuelson 1965). Fast food chains that rely on chicken-based meat products will have a major impact on it as well, as they will exceed the local consumer’s buying power.

Q.2 Can you think of examples or situations where price elasticity is used in business to determine the price of products? For example, how do airlines use the concept of price elasticity to price their flights?

McDonald’s, Starbucks, or KFC can be used as examples to exemplify the implications of price elasticity in product price determination. Since the ingredients used in the preparation of the fast food items will be dependent on fast food products, the element of price determination will include the current market price for the acquisition of those products. Since the before-mentioned examples are part of FMCG, these examples will have a continuous variation in their price, with the rise and fall in the market.

Q.3 Is it fair to call economics a science? Why or why not (and don’t worry, your answer won’t offend me). Why are economic assumptions important, and if economists can’t do laboratory experiments, how do they draw conclusions about their assumptions?

Economics is considered a scientific field since data trends gathered from analyzing and sampling price changes in the market help determine the growth and downfall of market segments (Horwitz 1980). An economic analyst can foresee the future of any market segment based on the trend that has been observed. This can also assist in defining whether a country’s economy is progressing or regressing.

Q.4 I have often said to my students that a person (and especially an economist) should not offer normative statements about the world if he/she cannot provide a positive analysis of the situation. What do you think I mean by this statement? Do you agree or disagree, and why?

I agree with the statement mentioned above since it is only helpful to back up a normative statement with evidence or facts worthy of building a strong case for the normative statement. A positive analysis establishes the basic guideline of viewing and analyzing things from all perspectives, henceforth getting a good perception of things from both a positive and a negative angle (Hands 2012).

References

Hands, D. W. (2012). The positive-normative dichotomy and economics. Handbook of the Philosophy of Science, 13, 219-239.

Horwitz, M. J. (1980). Law and Economics: Science or Politics?. Hofstra Law Review, 8(4), 2.

Samuelson, P. A. (1965). Using full duality to show that simultaneously additive direct and indirect utilities implies unitary price elasticity of demand. Econometrica: Journal of the Econometric Society, 781-796.

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