ECON 103 Lecture Notes - Lecture 3: Opportunity Cost, Invisible Hand, Externality
18 Sep 2015
School
Department
Course
Professor
Document Summary
Economics: the study of how society manages its scarce resources. How people make decisions: people face trade-offs. There is no such thing as a free lunch : to get something, we have to give up something else, ex. Incentive: something (such as a punishment or reward) that induces someone to act: ex. A tax on gasoline convinces people to drive less, or drive electric cars instead: when policies don"t consider incentives, they often end up with adverse results, ex. Seat belts caused people to drive more recklessly, which, in turn, caused more pedestrian accidents: when analyzing policy, we must consider incentives, and any possible outcomes. Pollution: market power: the ability for a single economic actor to have a substantial influence on market prices (ex. One man owns the only well, he can charge as much as he wants for water)
