ECO100Y1 Lecture 1: lecture 1-3
Document Summary
Alters marginal benefit or marginal cost of an action (and can thus affect whether an action is taken). When economists review proposed policy initiatives, they draw attention to the incentives so created, some of which are unintended. Incentives: unintended consequences of public policy: to help low-paid workers, province raises the minimum wage rate to . 00 per hour. Response: employers choose to hire fewer workers thus reducing the opportunity of unskilled workers to gain experience: to protect workers, province requires firms to make large severance payments if plant is shut down. Response: firms can choose where to locate plants, and fewer plants may be opened (thus reducing job opportunities: province requires use of seatbelts, to reduce injuries. Response: before legislation, drivers choose degree of care by weighing marginal benefits and marginal costs. Marginal cost (drives slower, pay more attention: with legislation, marginal benefit of care declines (less likely to be injured, if accidents occurred, drivers choose to exercise less care .
