Author Question: Comment on the following statement: Input and output markets should be considered separately because ... (Read 51 times)

tsand2 · **on:** Jun 29, 2018

Comment on the following statement: Input and output markets should be considered separately because they operate independently of one another.

What will be an ideal response?

Question 2

Many people believe that the study of economics is focused on money and financial markets. Based on your reading of the chapter, how would you define economics?

What will be an ideal response?

kkenney · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The statement is false. Input and output markets are connected because firms and households make simultaneous decisions in both arenas. For example, a change in the price of one input will affect the amount of the input used, the demand for other inputs and the cost of producing the output. This will affect the quantity of the output purchased by households and may affect household demands for other goods as well.

Answer to Question 2

Economics is the study of how agents (for example, households and firms) choose to allocate scarce resources and how these choices affect society. Although it is true that economics studies money and the financial markets, the study of economics is really focused on human behavior and choices. Given that we have limited resources, we need to choose between various options. Economic analysis is used to understand people's choices in order to describe what people do and recommend what people ought to do.