ECON-2110 Lecture Notes - Lecture 2: Trophy Hunting, Resource Allocation
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ECON 2110: Introduction to Microeconomics August 24th
Introduction Question: Cecil the lion - Can allowing trophy hunting actually increase the
population of lions?
***consider the incentives***
Living in a village: lions eat cattle & they eat you!! (costs)
If there are less benefits, villagers will:
Be please w poachers
How can we get villagers to change behavior?
MORE BENEFITS! (revenue)
Villagers are paid a portion of trophy hunting fees?
Kill fewer lions
Report illegal poaching
Topic 1: The Economic Way of Thinking
The Big Q (of all societies): What to make? Who makes it? Who consumes it?
^^^ How are resources allocated???
Resource allocation example:
People are moving to Greenville (more houses) & people are moving from detroit (less)
Who tells builders to allocate more to Greenville?
Who tells everyone what to do???????
There is NO central figure of control (Central planner = very hard)
A large number of parties react independently and in a decentralized
fashion to information communicated through market prices.
**** the incentives created by rising and falling prices ensure that resources are used
where they are most valuable
Microeconomics provides a model of resource allocation through markets
Markets: Where buyers and sellers get together (BROAD)
Markets can be monetary or non-monetary but there are always willing buyers and
sellers (Price and exchange)
There are markets for: apples, human kidneys, spouses, political influence
The Economic Model
We live in a world of scarcity
Scarcity: you must give something up to get more of something else
Diamonds are scarce (but also rare)
M&Ms are scarce (but not rare)
**Not concerned with money, but what the money represents**
Because of scarcity, we are constantly facing choices
Economics = how choices are made
Optimize: what makes them best off
Equilibrium what makes them best off
The economic model is based off of several principles:
1. Life consists of trade-offs
Implication of scarcity
“No such thing as a free lunch”
2. As trade-offs change, (some) people change what they do
^^ People respond to incentives