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Econ 1110 Application Paper Economic Principle: SCARCITY & OPPORTUNITY COST: How

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Econ 1110 Application Paper
Economic Principle: SCARCITY & OPPORTUNITY COST:
How they shape our choices and reflect our normative
Simply copy the paper heading, inserting your own name, of course!
DO NOT COPY the FOLLOWING BLOCK STYLE below
I expect a paragraph for EACH NEW IDEA
perspectives.
YOUR NAME
FIRST SECTION
In your own words (do not quote or paraphrase the text or any other source), explain as completely as you can what an economist means by SCARCITY (define this term). Describe the 5 economic resource categories and how they relate to the scarcity problem. (the 5th is Human capital) Explain opportunity cost. How does it reflect scarcity? What does it have to do with decision making? Finally, explain the difference between positive and normative economics and how our normative positions affect the choices we make — individually and as a society.
SECOND SECTION
Choice 1:
Title the next section of your paper MY SITUATION:
Identify two competing outputs (not activities) in your
life. SELECT A SITUATION THAT ALLOWS FOR SOME COMPROMISE. No all-or-nothing dilemmas. Clearly, you have lots of things competing for your resources, but pick just TWO tasks or products or services you produce. Only two because you will be translating your situation to a 2-dimensional PPC graph.
FOCUS on OUTCOMES not on activity. The limited resources are your constraints and are held constant, so explain how much of your labor and human capital you have to divide between these two goals. You can measure the application of your resources using time (think in terms of man hours or machine hours), but TIME is NOT itself an economic resource. Time is simply an allocation measure.
Here is an example: If I have two hours of my labor and human capital (labor and human capital are the limited resources, NOT time), what can I produce? Option #1 is to grade Econ1110 papers, so the number of papers graded is the “good” produced. Zero will go at my graph’s origin and the maximum 2-hour output (say, 10 graded papers) at the x-intercept. Option #2 is to hit golf balls. I can hit 120 golf balls in 2 hours.
Then I explain how accomplishing more on one front means scaling back on the other. The more papers I get graded, the fewer golf balls hit and, as a result, How do my normative beliefs shape my decisions? This output choice need not be all-or-nothing.
I could split my resources 50/50, grading 5 papers and hitting 60 golf balls. That puts me about in the middle, with 5 papers graded 60 golf balls hit. But it is finals week and grades are due, so this day I give my all to your work, grading the maximum: 10. I love golf, but teaching is what i do best, and it’s what I get paid for! It would be nice to get paid for playing golf, but I am not at that level. So, how could I make this decision? This is satisfactory in the short-run and okay with my very understanding husband. But in the long-run, allocating my resources 100% to grading and 0% to golf is totally unacceptable and would lead to a stir crazed teacher. In the long- run, one must find a happy median between work and play.
You describe two competing products/services/tasks. Remember, you can measure your output/accomplishment quantitatively (counting up) only. What are the resource constraints that force you to choose? Why can’t you “have it all”? DO NOT cite time or money as your limited resources. If you are tempted so to do, look again at the list of five economic resource categories. How do your beliefs help you decide which output combinations
are normatively acceptable are which are not?
Earned income is a proxy for the value of labor and human capital you “sell” to your employer. It is NOT an economic resource, an input. Earned income can be treated as a production possibility (apply your labor and earn a paycheck), but not as a resource (input) into the production of some other good/service. And time? It measures incremental application of the 5 economic
resources. We refer to man-hours (labor and human capital), machine hours (physical capital), and so on.
neither time nor money is an economic resource;
 whatthecompetingoutcomesareandhowyou measure accomplishment/output in each case;
 thecompetingNORMATIVEargumentsforpursuingmoreof eachTgood. In other words, why is more of this better than more of that?
 Considerwhether/whyyourcurrentproductiondecisionisreally the best. Can you think of a better place on the production possibilities curve to produce? Does taking a long-run view of the situation lead you to a different “best place” than would a short-run perspective?
 THE FIRST 2 SECTIONS OF YOUR PAPER CANNOT EXCEED 3 PAGES. One page for each section, is the minimum. Your graph page is in addition to this
Choice 2
Title the next section of your paper MY SITUATION: Identify two competing purchases (not activities) in your life. SELECT A SITUATION THAT ALLOWS FOR SOME COMPROMISE. No all-or-nothing dilemmas. Clearly, you have lots of things competing for your income, but pick just TWO that are very important and compete with one another for the income you have available (no credit). Only two because you will be translating your situation to a 2- dimensional budget line.
You will need to find a choice that you ACTUALLY face daily, weekly or monthly with a fixed amount of income. You will need ACTUAL PRICES of the two products under consideration. You will spend ALL of this fixed income.
You will identify the monetary and relative prices for a unit of each of the two products under consideration.
You will also:
 Identify the maximum amount of each product you COULD purchase given the fixed income and known prices
 Identify the ACTUAL amount chosen of each product
 Finally think of the benefit you get from your
purchase… what would you be willing to pay (not the actual price) and consider the consumer surplus from your pruchases..discuss.
Here is an example: If I have $15 for lunch on Tuesday as we always go to BW# as a group. I could get wings or my favorite sandwich, jerk chicken. Wings are $0.50 on Tuesday and the jerk Sandwich is $6. I could buy 30 wings or 2.5 jerk sandwiches.
I actually choose 1 sandwich and 18 wings.
FINALLY
The graph
What goes with Choice 1:
Draw a production possibilities curve (PPC) to show the competing objectives discussed in your MY SITUATION section. There are examples of PPF graphs in the Scarcity PowerPoint presentation. What are the two output options you discussed in the paper’s MY SITUATION section? Scale out units of one on the y- axis and units of the other option on the x-axis. What are the “production” combinations available? Plot those points, connecting the dots to draw your curve. Mark your current position and label it I AM HERE. Then also mark where you would like to be, if it is not your current position.
You are graphing 2 GOODS, so you should have
a desirable output measured out on each axis, NOT the scarce resources/inputs. Keep in mind, too, that neither time nor money is an economic resource.
For my papers vs. golf example, the number of papers graded goes on the y-axis (0 at the origin, 10 at the intercept) and the #of golf balls hit, measured on the x-axis. In the short-run, “I am here” at the y-intercept showing 15 papers graded and a poor golf game. This works in the short-run but, in the long-run, I operate way down the PPC — grading fewer papers and having a much better golfer.
The graph you submit with your paper can be computer generated or hand-drawn. Either way, it should be the LAST PAGE of YOUR PAPER’S E-MAILED WORD DOCUMENT, not sent as a separate attachment. If you hand-draw your graph, put
it on graph paper and then scan it so you can paste it onto your Word document’s last page. DO NOT SEND YOUR GRAPH AS A SEPARATE ATTACHMENT.
Hand-drawn or computer generated, your graph should be neat, correctly composed, and completely labeled. INCLUDE YOUR GRAPH AS THE LAST PAGE OF YOUR WORD-DOCUMENT PAPER. Send the whole document to me as ONE e-mail attachment.
Title must include the following (above the graph and in a single phrase):
Your name; the fixed time period, and the two products such as:
Scott’s PPF of golf balls hit and papers graded over 2 hours.
——————————————————————————————
What goes with Choice 2:
Draw a production BUDGET LINE to show the competing objectives discussed in your MY SITUATION section. What are the two output options you discussed in the paper’s MY SITUATION section? Scale out units of one on the y-axis and units of the other option on the x-axis. What are the “consumption” combinations available? Plot those points, connecting the dots to draw your curve. Mark your current position and label it I AM HERE. Then also mark where you would like to be, if it is not your current position.
You are graphing 2 GOODS, so you should have
a desirable consumption measured out on each axis, NOT the scarce resources/inputs, nor money. Keep in mind, too, that neither time nor money is an economic resource.
For my wings vs. jerk sandwich example, the number of wings goes on the y-axis (0 at the origin, 30 at the intercept) and the #of jerk sandwiches, measured on the x-axis (2.5). In the short-run, “I am here” at the y-intercept showing 18 wings and a 1 sandwich.
The graph you submit with your paper can be computer generated or hand-drawn. Either way, it should be the LAST PAGE of YOUR PAPER’S E-MAILED WORD DOCUMENT, not sent as a separate attachment. If you hand-draw your graph, put
it on graph paper and then scan it so you can paste it onto your Word document’s last page. DO NOT SEND YOUR GRAPH AS A SEPARATE ATTACHMENT.
Hand-drawn or computer generated,
Your graph should be neat, correctly composed, and completely labeled. INCLUDE YOUR GRAPH AS THE LAST PAGE OF YOUR WORD-DOCUMENT PAPER. Send the whole document to me as ONE e-mail attachment.
Title must include the following (above the graph and in a single phrase):
Your name; the fixed income, and the two products and prices such as:
Scott’s budget of $15 spent between wings at $0.50 and jerk sandwiches at $6.

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