Lecture Extender Examples
Chapter 1 The Nature of Economics
The Perceived Value of Gifts
At Christmas and birthdays, aunts, uncles, grandparents, and parents give gifts to their college-aged loved
ones. Joel Waldfogel, an economist at Yale University, surveyed several thousand college students after
Christmas to find out the value of holiday gifts as perceived by the students. He found that CDs and
outerwear (coats and jackets) had a perceived value about equal to their actual cash value. By the time he
got
cash value of the gift. What argument can be made against the idea of substituting cash or gift certificates
for physical gifts?
Student Printing in the University
Most universities allow students to use university network printers in student labs when they are working
on the university network as part of their tuition or computer use or technology fees charged to students
when they register for classes. The average school spends several thousand dollars per month for this
service. This service is expensive because students print personal jobs unrelated to academics, such as
downloads from entertainment Web sites and photos of friends and family. Winthrop University in South
Carolina decided to charge students a $10 printing fee that allows them to print 250 pages per semester on
University network printers. After that, the students are charged $0.04 for each additional page that they
print. Assuming students are rational, what do you pred
they implemented this charge? Why?
Are Economics Students Rational?
If you did a survey in your economics class, not all students would agree with the statement
In an attempt to show that the rationality assumption is accurate nonetheless, an increasing
number of economists are doing the same kinds of experiments that are used in the physical sciences. One
Lecture Extender Examples 511
The results were consistent with the rationality assumption. One-third of the students in the group that
was paid regardless of performance picked all of the gambles correctly. In the second group, for which
performance was distinctly rewarded, two-thirds of the students had no errors in making their
calculations.
Incentives and Childhood Obesity
Children who gain weight eat more calories than they use up each day. The ones who gain weight the
fastest eat relatively more high-calorie foods such as hamburgers, French fries, and other fast foods. They
also exercise less, preferring to spend more of their time watching TV and playing video games rather
than playing out doors and participating in sports.
Traditionally, mothers have taken responsibility for making the choices about what foods children eat and
the scope of their outdoor activities. As compared to the 1960s, when about one-half of mothers worked
outside the home, more than three-fourths do so today. These mothers have less time to keep their
children from eating too much, e.g., in the hours after school before getting home from work, and to take them
to playgrounds to exercise. This helps explain why only 8 percent of children whose mothers have never
worked outside the home are obese as compared to 17 percent among children whose mothers work full-
Incentives and the Internet
It is worth examining the idea that changes in incentives cause people to change their behavior. In recent
years, the cost of some types of high-speed Internet service has declined to as little as $20 per month for
unlimited access to the Internet. This means that people who use their high-speed connection primarily
for surfing the Web for information and e-mail pay exactly the same amount per month as do gamers and
people who download music and videos. The first group uses very little bandwidth, and the second group
uses very high amounts of bandwidth. Recently, some Internet service providers (ISPs) have put forth the
512 Miller Economics Today, Nineteenth Edition
Getting Directions
Suppose that you plan to take a trip from San Diego to San Francisco and you have never made this trip
before. You could use Google Maps and it would tell you to get on Interstate 5 going north until you get
to San Francisco. Alternatively, suppose that you want to get to a specific address in San Francisco. In
this case, Google would give you a map that tells you to get on Interstate 5 going north until you get to
San Francisco. At this point, it would give you the freeway exit number needed and a detailed street map
that would allow you to drive to the address you have chosen.
How does a map resemble a model and the realism necessary of that model? A model should capture only