Your Money or Your Life: Microeconomic Lessons From the Pandemic

Your Money or Your Life: Microeconomic Lessons From the Pandemic

Nancy Ruth Fox (Saint Joseph's University, USA)
Copyright: © 2022 |Pages: 28
DOI: 10.4018/978-1-7998-6900-9.ch002
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Abstract

The pandemic offers numerous applications of very basic microeconomics concepts and their extension to other aspects of economic life. It also creates an opportunity for better understanding of how the market works and its effects on the economy and society. Allocation of a scarce resource is the definition of economics. There have been countless examples of scarcity (toilet paper, vaccines). How do we decide how to allocate those goods, especially when the market fails? The pandemic is a classic illustration of tradeoffs. In particular, there are tradeoffs between shutting (or re-opening) the economy and loss of human life; a rational decision would compare the costs and the benefits. Lastly, there are countless examples of the unequal economic effects of the virus and their implications for public policy.
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Introduction

Much of the media coverage, as well as most scholarly research about COVID-19, focuses on the macroeconomic effects, especially unemployment, recession, and economic recovery. This is not surprising, given the unprecedented and global impact of the virus. The author believes that these are not the most interesting economic topics related to the pandemic. There are numerous applications of very basic microeconomic concepts and their extension to other aspects of economic life, as well as the opportunity for better understanding of how the market works and its effects on the economy and society.

In this chapter, the author analyzes three microeconomic applications of the pandemic. Part I is a discussion of the allocation of a scarce resource, the definition of economics. The pandemic provides examples of how the market can do this when it should not, which expands and changes the meaning of scarcity. Part II is an analysis of tradeoffs. In particular, there are tradeoffs between shutting (or re-opening) the economy and loss of human life; a rational decision maker would compare the costs and the benefits. Part III is a discussion of how the pandemic has affected certain sectors of the economy more profoundly than others and intensified existing income inequality.

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