COVID Economics #5: Reopening the economy

With states slowly beginning to reopen, it is interesting to consider how governments decide this process (relating a bit to last time’s Question #2). In the end, it does come down to numbers. Economists estimate that the cost of one (statistical) human life is $10 million, calculated by seeing how much extra money people demand for higher-risk jobs like construction. This is a renewed method – before, the cost of a human life was determined by calculating the opportunity cost of death (how much money the person would have made if they continued to work in their current job). It’s a harsh way to look at it, but in these complex cases where it’s between saving people from COVID or saving people from unemployment-related injury/death, math helps with decision-making.

Last time’s answer:

  • Marginal product of labor = 5
  • Price of capital = $45

In honor of APs coming up, here are 2 practice questions for the weekly challenge:

  1. Given an increase in the price of material K— which is an input used to produce good X—and an increase in the price of good Y—which is a substitute for good X—what will happen to equilibrium price and quantity of good X?
  2. Assume the Oeconomia bank has $2000 in reserves and $5000 in demand deposits with a reserve requirement of 10%. If Mr. Lizardo withdraws $500, what are the bank’s excess reserves?

We are in the process of planning an AP review Kahoot in partnership with the Quizbowl Club – keep an eye out for further details!

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