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Assignment # 1  Due: _______________

1.  Based on the following article:

a.  Does the author favor a market for kidneys? Why?

b.  Describe an alternative method to a market distribution that would not involve a market?

c. Which method, the market method or the alternative method is best? Why?

Title: How much is that kidney in the window?

By Bruce Gottlieb; Adapted from

The New Republic

As of April 30, there were 44,989 people on the waiting list for a kidney

transplant. About 2,300 of them will die this year while waiting. If kidney sales

were permitted, these lives would almost certainly be saved.

There are several familiar arguments against legalizing kidney sales, beginning with the idea that giving up a kidney is too dangerous for the donor. But, popular though this argument is, the statistics don't bear it out-at least relative to other risks people are legally permitted to assume. In terms of effect on life expectancy, donating one of your two kidneys is more or less equivalent to driving an additional 16 miles to work each day. No one objects to the fact that ordinary jobs-like construction or driving a delivery van-carry roughly similar risks.

Another common objection is that government ought to encourage altruism, not profit seeking. But, from the perspective that matters-the recipient's-this

distinction is irrelevant, so long as the donated kidney works. It's not as if the

point of kidney transplants were to improve the donor's karma. Moreover, kidneys from cadavers function for eight years, on average, whereas those from live donors last 17 years. (The reason is that kidneys can be "harvested" from live donors in circumstances less hectic than death and that donors and recipients can be better matched.)

This brings us to the most powerful objection to the sale of kidneys-that, in practice, it would result in the poor selling parts of their bodies to the rich. But, in today's health care economy, that probably wouldn't be the case. For several decades, Congress has mandated that Medicare pay the medical bills of any patient-of any age-who requires dialysis. Transplant surgery and postsurgical drug treatment are expensive, yes, but they're nothing compared to dialysis, which costs about $40,000 per year. That's a savings of $40,000 per year for the 17 years or so during which a transplanted kidney will function. In other words, insurers and the federal government would probably be happy to buy a kidney for anyone who needs one. They'd even be willing to pay donors considerable sums-$50,000, $100,000, or more

Given the amount of money involved, it seems downright contradictory to argue that the poor should be prevented from taking the deal on the grounds that poverty is unfair. Critics will say that allowing kidney sales is the beginning of a slippery slope toward selling other, more essential organs. This, of course, would be a moral disaster, since it would mean legalizing serious maiming (selling eyes) or even murder (selling hearts or lungs). The prospect of someone going under the knife to earn a down payment on a new house or to pay for college is far from pleasant. But neither is the reality of someone dying because a suitable kidney can't be found. The free market may be the worst way to allocate kidneys. The worst, that is, except for all the other alternatives.

2.  Your uncle from back east visits for Thanksgiving. He tells you about his proposal to prevent high prices for plowing snow from driveways after snowstorms. Private companies charge $300 for this service, a price he considers too high. He wants the city council to pass a law capping the price at $100.

Using your recent learning in economics, draw the supply/demand diagram showing the situation before the law is passed. What does it look like?

Then, how would your uncle's proposal affect the market? Show this in your diagram?

What would be a better proposal? Show why this proposal is better using a supply/demand diagram.

3. Think of a good or service with which you are familiar and for which there has been a recent change in quantity demanded because of a change (up or down) in price.

What is the good or service?

What is your best estimate of the original quantity demanded? New quantity demanded? (please explain your units carefully.) You don’t need to do research: these numbers can be a best “guess.”

What is your best estimate of the original price? New price? (please explain your units carefully.)

What is price elasticity of demand for this good or service? Please show your work.

How does this elasticity compare with others listed in the textbook?

4. We have studied several ways in which elasticity is measured in economics. The concept can be used to study other relationships between two things—along as each is measurable and they affect one another.. The importance is that elasticity allows us to put a number on the relative way in which one thing affects the other. Is it a positive effect? How strong is that effect?

Think of two things you know about in your life. It could be from your work life, your hobbies, or your home life. Just please don’t use anything that involves prices or the example of your grades and study time as we used in class.

How would you measure elasticity between these two things? Be specific about the units used. Would you expect the elasticity to be positive or negative? Why? Will the elasticity be greater or less than 1 (or -1)? Why?

1- 4 Calculus option. For any of the questions above, you may substitute the following:

At the course Canvas site, click on Microeconomics and Calculus, review the sections “Impact of currency value on imports and exports,” “Elasticity and “Elasticity and Total Revenue.” Please record your answers and explain how you reached that answer (no problem if you got it wrong the first time; explain why). Then, imagine that you are explaining the importance of this module to someone who has not studied calculus. What does it tell us about the economics of exchange rates, elasticity, and total revenue? 

Question 5 is for everyone, including those who did the calculus option.

5. For one important and interesting idea that you have learned so far in the course based, write a one page essay beginning with the following statements:

Although before this class I believed  ……..,  in fact……..Or,

Although it is tempting to believe……., in fact…..Or,

Although it might seem that …………… is true, in fact……

Then explain why you or others could believe the idea that is fact incorrect. In other words, what is logical or compelling about this incorrect idea.

Then explain carefully why the original idea is incorrect.

Then explain why it is important that we understand the idea correctly.

Finally, use at least one concrete example to illustrate why misunderstanding the concept leads to a problem that is resolved if we understand the concept correctly.