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Economics interview
Use models and trade-offs to examine incentives and unintended consequences.
One thinking framework
Use the same five steps for the exercises below. Familiarise yourself once, then focus on explaining your reasoning.
Five steps for your reasoning
1
Define variables, assumptions and a model
State what you are studying and what you will temporarily ignore.
2
Explain your choice of method
Connect your formula, theorem or comparison to the problem.
3
Explain each step as you calculate
Explain relationships, substitutions and intermediate conclusions.
4
Check units, scale and plausibility
Check signs, ranges, dimensions and possible sources of error.
5
Adapt to hints and changes
Identify which assumption changes and revise your approach.
1
To make housing affordable for the poor, a city legislates a cap on rent. What unexpected consequences might this policy have?
2
A cup of coffee sells for 40 yuan at the airport and for 15 yuan at a corner shop, yet the costs are actually about the same. Why?