Category: Economics

➤ How does the Council of Economic Advisers differ from the Congressional Budget Office?
The Council of Economic Advisers provides the President with economic analysis and policy recommendations, focusing on growth and labor market outcomes. The Congressional Budget Office produces nonpartisan budget estimates, cost analyses, and long-term fiscal projections for Congress. CEA advises on policy design; CBO scores legislative costs and assesses budgetary impacts independently.

Cars that are manufactured in South Africa but exported to other countries will not be included in the GDP when using the production method to calculate the GDP.TrueFalse
True
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➤ How do you calculate price elasticity and identify perfect inelasticity?
Compute elasticity as the percent change in quantity divided by the percent change in price. If the percent change in quantity is zero, elasticity equals zero and demand is perfectly inelastic. Use point elasticity for very small changes and arc (midpoint) formulas for larger discrete price or quantity shifts.

Based on our understanding of consumption and saving, we know that the marginalpropensity to consume and the marginal propensity to save must be equal to eachother. (T/F)

➤ Can consumers benefit from price discrimination?
Yes, some consumers can benefit through targeted discounts, coupons, and off-peak pricing that lower costs for price-sensitive groups and expand access. Firms may also offer lower-cost versions that reach more buyers. Still, overall gains vary, since many cases shift surplus from consumers to producers.

➤ Why is it important to distinguish marginal private cost and marginal social cost?
Distinguishing marginal private cost (MPC) from marginal social cost (MSC) shows how external costs alter optimal production. When MSC exceeds MPC, firms overproduce relative to the social optimum. This gap creates deadweight loss and justifies policies like Pigouvian taxes, regulation, or property rights to align private incentives with societal welfare.