How people make choices.
Axiom the world is characterized by Scarcity. What follows?
i. People/society face trade-offs (means incur cost) (There’s no such thing as free lunch) eco vs. sleep /education vs. national defense
*Equity vs. Efficiency
The increase of economy pie may result in less distribution of some parts of the pie.
Eg. Rizzo as banker & professor. Shrinkage of tax and wealth thwarts efficiency.
Nothing is free. Safety and clean air are not free. But people may spend so much on them.
*FDA (Food and Drug Administration) Tradeoff of society
Drug Lag (The longer it takes to ensure safety, the more people who may benefit from the drug die)
Drug Loss (Drug don’t get produced kills people)
-----What is a “cost”? Anything that consumers resources
*Tax itself is not costly. It’s just a transferring. But the collection may be a problem (deadweight loss)
ii. Opportunity Costs (implicit)-----Net Value (what you give up to get something)
Eg. Suppose you win a ticker of Bruce and you can’t resell it. Suppose Rizzo told you to go to Barry Manilout’s for $40 while you value B.M. for $50. If I decide to see Bruce, the net value (cost) will be $10 (You must get at least 10 bucks’ pleasure from Bruce).
iii. Thinking at the margin
-----------------subjective
iv. People response to incentives.
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