Introduction to Economics Essay Example | Topics and Well Written Essays - 500 words

Introduction to Economics - Essay Example Francis enjoys an absolute advantage. Why would there be an advantage to turning either task over to Phil and specializing? The answer comes from the Ricardo Theory that was put forth by the 19th century economist David Ricardo (The history of economic thought n.d.). The theory addresses the problem of comparative advantage. As can be seen from the table the cost of a phone call for Phil (.125 statements) is less than the cost of a call for Francis (.2 statements). However, the cost of a statement for Phil is 8 calls, but for Francis it is only 5 calls. Francis can produce a statement for fewer resources than Phil, and Phil can produce a call for less than Francis. They should therefore specialize. Phil should answer the phone and Francis should do the financial statements. This study was undertaken to analyze the effect that demand has on the US real estate market. The project studied the housing costs in 6 major cities. It was theorized that three factors; Demand, Area Income, and Value would affect housing. By evaluating the median housing price, the median incomes, and the housing available at the median price we were able to show the influence of demand. It was found that area income had no effect on housing cost. Likewise, we found that the higher cost areas provided less housing than the lower cost areas. The study concluded that the market was almost exclusively demand driven. The 6 major cities that are listed on the graph in Figure 1 display their median housing cost. It ranged from a high in San Francisco CA of $726,700 to a low in Austin TX of $170,900. The other 4 cities, New York, Boston, Seattle, and Chicago fell in the middle. If there were an increase in cost is due to higher local area wages, it would be expected that all cities would spend about the same percentage of their wages for housing. However, the graph, indicated by Relative % of income, shows that people in San Francisco spend a proportion of their