- Explain how the following news headlines concern self-interest and the social interest.
a. Starbucks Expands in China
b. McDonald’s Moves into Salads
c. Food Must Be Labeled with Nutrition Data
- The night before an economics test, you decide to go to the movies instead of staying home and working your My Econ Lab Study Plan. You get50 percent on your test compared with the 70 percent that you normally score.
a. Did you face a tradeoff?
b. What was the opportunity cost of your evening at the movies?
The Correct Answer and Explanation is :
1. The Relationship of Self-Interest and Social Interest in the Headlines:
a. Starbucks Expands in China
This headline reflects both self-interest and social interest. Starbucks, as a corporation, is expanding into a new market to increase its profits, which represents self-interest. The company aims to benefit from a larger customer base in China, where coffee culture is growing. However, this move also contributes to the social interest. By providing jobs, expanding consumer choices, and stimulating local economies, Starbucks’ expansion could have positive social impacts on China’s economy. The expansion may also influence local cultural practices by introducing a more Westernized coffee culture.
b. McDonald’s Moves into Salads
McDonald’s decision to offer salads represents self-interest because it seeks to diversify its product offerings and cater to health-conscious consumers, thus increasing its market share and profits. This move can also serve social interest by providing healthier food options in response to increasing concerns over fast food’s role in obesity and health problems. The company addresses public demand for healthier alternatives, which can help improve overall societal health.
c. Food Must Be Labeled with Nutrition Data
This headline touches on both self-interest and social interest as well. For food manufacturers, providing nutrition labels serves their self-interest by increasing consumer trust and potentially boosting sales of healthier products. However, the requirement also serves the social interest by providing consumers with the information they need to make informed decisions about their health. It promotes transparency, which can lead to better public health outcomes by encouraging healthier eating habits.
2. Decision to Go to the Movies Instead of Studying: Tradeoff and Opportunity Cost
a. Did you face a tradeoff?
Yes, you faced a tradeoff. A tradeoff occurs when you make a decision that sacrifices one benefit to gain another. In this case, you had to choose between going to the movies and staying home to study. By choosing the movie, you sacrificed the potential benefit of better preparation for your economics test, which would have likely resulted in a higher score. The tradeoff was the enjoyment and relaxation of the movie versus the higher grade you could have achieved by studying.
b. What was the opportunity cost of your evening at the movies?
The opportunity cost of going to the movies was the higher grade you could have earned on the test by studying. In economics, opportunity cost refers to the next best alternative that you forgo when you make a choice. By choosing the movie, you gave up the chance to improve your test performance, which was a more valuable outcome in terms of your academic success. The 50 percent test score you received instead of your usual 70 percent reflects the consequence of this decision. In economic terms, the opportunity cost of going to the movies was the 20 percent of your usual score that you gave up, as well as the potential long-term benefits of a better understanding of the material, which could affect future tests or your overall grade.
This scenario illustrates how tradeoffs and opportunity costs are present in everyday decisions. Even seemingly simple choices like watching a movie instead of studying have measurable consequences that reflect the value of the alternatives.