ECN 340 Lecture Notes - Lecture 5: Minnie Mouse, Rationality, Root Beer
Document Summary
The economics of sex, crime and minnie mouse. They are rational, there must be a change in mc and mb. Rational people respond to trade offs and to incentives and disincentives when the cost or bene ts of a course of action change, people change their behaviour as they max satisfaction. They think, not always consciously, about the future as well as the present as they try to anticipate likely consequences of their actions in an uncertain world. Kids must be responding to incentives: cost of oral sex is lower then regal sex, so they substitute. The assumption that people are rational leads us to some clear and testable theories about the way the world works. It can help us to strip layers of complexity and guide us toward possible solutions. High crime ares, must raise cost or lowering bene t of crime. High crime (unlikely to get caught) low crime (likely to get caught)