Principles of Economics Matching Exercise Student Name: Date: Each scenario below practices one of the 10 principles of economics. Match the principles to the appropriate scenario listed and justify your answer.
Each principle will only be used once. Principles:
1. People face tradeoffs.
2. The cost of something is what you give up to get it.
3. Rational people think at the margin.
4. People respond to incentives.
5. Trade can make everyone better off.
6. Markets are usually a good way to organize economic activity.
7. Governments can sometimes improve market outcomes.
8. A country’s standard of living depends on its ability to produce goods and services.
9. Prices rise when the government prints too much money.
10. Society faces a short-run tradeoff between inflation and unemployment.
1. Even though generally more expensive, energy efficient appliances and vehicles sell better with a rebate or tax credit.
2. Airlines will charge a fee for each additional suitcase you may want to take with you on a trip.
3. At a restaurant, when ordering an entrée, you get to choose two side dishes from a group of five side dishes.
4. Instead of growing your own food and making other necessities you decide to specialize in a particular profession and purchase things, even things that you would have not been able to make yourself.
5. There is an incredible variety of goods and services available at many different price points even though no single entity or government is deciding or dictating the market what to do.
6. In its effort to limit the effects of rising inflation, the Federal Reserve System reduces the quantity of money in the economy, but sees an increase in unemployment.
7. While consuming the same amount of farmers’ labor and capital the newly developed hybrid crops achieve twice the yields of the previous crops.
8. You have noticed that the same amount of money buys you fewer goods and services than it did a year ago.
9. You worked for extra pay on a holiday and therefore missed out on your neighbors’ barbeque. People face trade-offs. You had to miss the barbeque to get something else that we liked.
10. Two major suppliers of powdered baby food formula are challenged by government on grounds of price fixing.