What is the "big tradeoff"?
What will be an ideal response?
The "big tradeoff" is the tradeoff between efficiency and fairness. The idea is that if the government redistributes income so that it is more equally shared, output decreases so that it is less than the efficient amount. Output shrinks because such redistribution blunts people's incentives to work. Hence redistributing income so that everyone has the same amount of income might end up insuring that everyone's incomes are smaller than if less redistribution is pursued.
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When people want to hold money to make regular planned expenditures, this is
A) the transaction demand for money. B) the asset demand for money. C) the precautionary demand for money. D) the spending demand for money.
The marginal utility graph for both would be negative because the marginal utility per hamburger and the marginal utility per milkshake both decrease as the quantity consumed increases. Both graphs would also approximate a curve because the change in marginal utility is not constant as the quantity consumed increases; for both graphs, the change is greater between the first two units consumed than between the last two units consumed. In addition, because the overall change in the marginal utility of hamburgers is greater than the change in the marginal utility of milkshakes, the hamburger curve would be steeper than the milkshake curve.
What will be an ideal response?