3 3 points total Identify the nature of the pitfall to sound

3. (3 points total) Identify the nature of the “pitfall” to sound economic reasoning represented by the following circumstances: a) (1 point) You are attending a concert and recognize that you will have a better view of proceedings if you stand—hence if everybody stood…everybody would have a better view. b) (2 points) You observe that consumption of beer and ice cream peak during the summer months and conclude that increased consumption of ice cream results in higher beer consumption.

Solution

In economics we are difficult to think accuratly and objectively for economic issues. So some pitfall always engaged in Economic reasoning. That is:

1. Fallacy of composition

2. Loaded terminology

3. Biases

4. confusing correlation and causation

A) Biases: it is simply a inclination or the partial perspective

B) confusing correlation and causation: Correlation does not imply that one causes the other.