Question 1
According to the short film, the basic principle of economic philosophy covered is trade, which
comprises transferring items or services for mutual benefit. Able and Charlie may be seen bartering fish
for shirts in the video. This transaction was recorded on video. As a result of this exchange, Able and
Charlie are able to focus on their unique talents and capitalize on the possibilities provided by their
various comparative advantages.
Able and Charlie do business because the transaction benefits both of them. Able isn't as adept at
making shirts as he is at fishing. Charlie, on the other hand, is an expert at making shirts but a total
failure at fishing. Able can get clothing without having to make them himself, and Charlie can acquire
fish without having to catch them himself. Both Able and Charlie are now in a better financial situation
than they would have been otherwise.
The essential assumption that drives the notion of trade is that individuals have diverse sets of skills and
capabilities that may be exploited to improve the efficiency with which items and services are produced.
The concept in issue is known as comparative advantage. Able has a comparative edge in this
circumstance when it comes to fishing, while Charlie has a comparative advantage when it comes to
shirt making. Since they have specialized in their own unique talents and trade with one another, they
are able to manufacture more items and services than they would have been able to produce on their
own.
The goal of this video clip is to show how trade may improve efficiency and mutual benefit by allowing
individuals to specialize in areas where they have comparative advantages.
Question 2
Favoring raising the minimum wage
Raising the minimum wage would directly benefit low-wage workers by increasing their income and
improving their standard of living. This, in turn, can lead to increased consumer spending, which can
stimulate economic growth. By raising the minimum wage, labor leaders can help to address income
inequality and promote economic mobility. On the other hand, a fair wage is a fundamental right for
workers, and the minimum wage provides a necessary protection for low-wage workers who may not
have the bargaining power to negotiate higher wages on their own in a competitive labor market.
Additionally, low-wage workers often face difficult working conditions and have limited access to
benefits such as healthcare and paid time off. By raising the minimum wage, labor leaders can help to
ensure that workers are able to meet their basic needs and have a better quality of life.
Opposing raising the minimum wage
Increasing the minimum wage will increase labor costs for businesses, which may lead to reduced profits
and potential job losses. It may also lead to higher prices for consumers, reducing demand for goods and
services. This can be particularly challenging for small businesses with limited profit margins, as they
may be forced to reduce staff or cut back on benefits to stay afloat. Conversely, businesses should have
the freedom to pay workers based on the skills and experience required for the job, rather than being
subject to government intervention. By artificially raising wages, the government may be distorting the
natural supply and demand for labor, which can lead to unintended consequences such as reduced
hiring or increased automation. In a competitive labor market, wages should be determined by the value
of the work being done, rather than by a government-mandated minimum.
Question 1
Prompt: Watch “FI$H – How an Economy Grows (Episode 2: Get Shirty)” [5:37 minutes]. Based
on the above video clip, which of the basic principles of economic thinking is/are addressed, and
explain why? Explain in A your own words, what drives Able and Charlie to trade? What is/are
the underlying assumption(s) that allow the trade to occur?
Based on the video clip, the basic principle of economic thinking addressed is trade, which involves
exchanging goods or services for mutual benefit. The video shows Able and Charlie engaging in trade by
exchanging fish for shirts. This exchange allows Able and Charlie to specialize in their respective skills
and reap the benefits of their comparative advantage.
Able and Charlie trade because they both benefit from the exchange. Able is good at catching fish, but
he is not good at making shirts. Charlie, on the other hand, is good at making shirts but cannot catch
fish. By trading, Able can obtain shirts without having to make them himself, and Charlie can obtain fish
without having to catch them himself. As a result, both Able and Charlie are better off than they would
have been without the trade.
The underlying assumption that allows trade to occur is that individuals have different skills and abilities,
and that these differences can be used to produce goods and services more efficiently. This concept is
known as comparative advantage. In this case, Able has a comparative advantage in fishing, and Charlie
has a comparative advantage in shirt-making. By specializing in their respective skills and trading with
each other, they are able to produce more goods and services than they would have been able to
produce on their own.
Overall, the video clip illustrates how trade can lead to increased efficiency and mutual benefit by
allowing individuals to specialize in their comparative advantages.
Question 2
Prompt: Read “YOU’RE THE ECONOMIST: Does the Minimum Wage Really Help the Working
Poor” in Chapter 1. Give a positive and a normative argument about why a business leader
would oppose raising the minimum wage. Give a positive and a normative argument about why
a labor leader would favor raising the minimum wage.
Positive argument for a labor leader favoring raising the minimum wage:
Raising the minimum wage would directly benefit low-wage workers by increasing their income and
improving their standard of living. This, in turn, can lead to increased consumer spending, which can
stimulate economic growth. By raising the minimum wage, labor leaders can help to address income
inequality and promote economic mobility.
Normative argument for a labor leader favoring raising the minimum wage:
A fair wage is a fundamental right for workers, and the minimum wage provides a necessary protection
for low-wage workers who may not have the bargaining power to negotiate higher wages on their own
in a competitive labor market. Additionally, low-wage workers often face difficult working conditions
and have limited access to benefits such as healthcare and paid time off. By raising the minimum wage,
labor leaders can help to ensure that workers are able to meet their basic needs and have a better
quality of life.
Positive argument for a business leader opposing raising the minimum wage:
Increasing the minimum wage will increase labor costs for businesses, which may lead to reduced profits
and potential job losses. It may also lead to higher prices for consumers, reducing demand for goods and
services. This can be particularly challenging for small businesses with limited profit margins, as they
may be forced to reduce staff or cut back on benefits to stay afloat.
Normative argument for a business leader opposing raising the minimum wage:
Businesses should have the freedom to pay workers based on the skills and experience required for the
job, rather than being subject to government intervention. By artificially raising wages, the government
may be distorting the natural supply and demand for labor, which can lead to unintended consequences
such as reduced hiring or increased automation. In a competitive labor market, wages should be
determined by the value of the work being done, rather than by a government-mandated minimum.
