You have won $8 million in the lottery and are trying to decide whether to buy a beach-house or a yacht. This is not an economic decision. This is a microeconomic decision. This decision involves trade-offs. Which of the above statements are true? Only 1 is true. Only 2 is true. Both 1 and 2 are true. Both 2 and 3 are true. All three are true.
Question
You have won $8 million in the lottery and are trying to decide whether to buy a beach-house or a yacht.
This is not an economic decision. This is a microeconomic decision. This decision involves trade-offs. Which of the above statements are true?
Only 1 is true.
Only 2 is true.
Both 1 and 2 are true.
Both 2 and 3 are true.
All three are true.
Solution
Both 2 and 3 are true.
This is indeed a microeconomic decision as it involves individual decision making. Also, this decision involves trade-offs as choosing one option (beach-house or yacht) means giving up the other. The first statement is false because this is an economic decision, as it involves the allocation of resources (the lottery winnings).
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