ECON 104 Lecture Notes - Lecture 10: Used Cars, George Akerlof, Pension
5 Apr 2016
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Continue from last week chapter 8 market power & microeconomic policies. Mother in law of invention (read on canvas on your own: not invention, but patent! R&d= million expect to make drug in 2 years. million expect to make drug in 1 year. We don"t know what we need to know: price, value (consumers, their own, cost (producers, their own) Experience goods: educaion, new food, world site seeing, books, movies, etc. (entertainment) Apple medium red 80% it taste good, v=. One party to the exchange knows more about value/cost than the other party does, and they can"t / don"t want to tell. Lemons are sold the bad drives out the goods . Once somebody gets insured, a person changes how they behave, in a bad way! Fire: cost of prevenion beneits of avoiding ire, on margin. Probability of catching on ire = 0. 01% per year. >graph< (google stump city to learn more about moral hazard)
