CLASS102 Lecture 2: Economics, Costs/Benefits, and Judging Economic Allocation
9 Jan 2019
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Economics: the study of the choices that people make and the actions they take to make the best use of scarce resources in meeting their wants and needs. It is a study of people: basically the study of choices made in the face of scarcity (scarce resources) Economic choices: consider some activity x (e. g. going to class). If benefits (x) > costs (x) do (x). If costs (x) > benefits (x) don"t do (x). Consider this situation: (x) = reduce the speed limit from edmonton to calgary to 10 km/hr. To find out, you have to consider both the costs and benefits. Contingent valuation: survey method asking people what they think the value of something is: problem: warm-glow bias: people want to be thought well of, even if it means not expressing their true opinions/thoughts/beliefs, problem: hypothetical questions receive hypothetical answers. Conclusion: weighing costs/benefits is very difficult and complicated.
