“Economists discover miracle hangover cure: drink less”

Read the article “Economists discover miracle hangover cure: drink less”, and write an essay to address the following questions:

• What are the basic assumptions that economists take as given when building their models of mentioned in the article? Why are these assumptions important to economists developing theory and building models? Why is it important that people using the models developed by economists know and understand these assumptions?
• What is the opportunity cost to Chris of going home to plan PlayStation?
• Jessica, the journalist, argues, ‘Hangovers are only possible because ordinary humans often do not fit the model of rational individuals prescribed by economists’. What reasons does she give for this? Is it necessarily true?
• According to economists how do rational people choose between alternatives and how do they explain changes in choices? Can you find an example to illustrate this in the article?
• Is the article a case of ‘It might work in theory, but it doesn’t work in practice’?

Sample Solution