ECON101 Chapter Notes - Chapter 5: Economic Surplus, Demand Curve, Avoidance Speech

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Robert Park

Document Summary

Market price: the people who are willing and able to pay that price gets the resource, 2 kinds of people choose not to pay market price: Those who can afford to pay but choose not to buy. Those (cid:449)ho a(cid:396)e too poo(cid:396) a(cid:374)d (cid:272)a(cid:374)"t affo(cid:396)d to (cid:271)uy. | works badly when range of activities is large and when its easy to fool those in authority. Contest: allocates resources to a winner or a group of winners, works best (cid:449)he(cid:374) the effo(cid:396)ts of the (cid:862)playe(cid:396)s(cid:863) a(cid:396)e ha(cid:396)d to (cid:373)o(cid:374)ito(cid:396) a(cid:374)d (cid:396)e(cid:449)a(cid:396)d di(cid:396)e(cid:272)tly, e. g. Manager hosts contest to award the best employee. The total output produced by the workers is much greater than it would be without the contest. Lottery: allocates resources to those who pick the winning number, draw the lucky card, or come up lucky, wo(cid:396)ks (cid:271)est (cid:449)he(cid:374) the(cid:396)e"s (cid:374)o effe(cid:272)ti(cid:448)e (cid:449)ay to disti(cid:374)guish a(cid:373)o(cid:374)g pote(cid:374)tial use(cid:396)s of a s(cid:272)a(cid:396)(cid:272)e (cid:396)esou(cid:396)(cid:272)e.