ECON104 Study Guide - Market Failure, Business Cycle, Externality
Document Summary
Utility for satisfaction maximization of differs between people; different people derive utility (happiness) from different things. Opportunity cost includes the actual cost and the utility expected of the alternative: people respond to incentives; understanding economic incentives is crucial in explaining the behavior of individuals and groups. Sometimes government policy can have perverse or unintended consequences. A politicians" number one goal is to be re-elected. 1: petrol sticker legislation- rather than not driving on the day of the week stickered people purchased another car with an alternative sticker. 2: communism in poland and the dictation of toilet paper and meat supply resulting in shortages: the role of information; information is important in the efficient allocation and use of scarce resources. 1: ladies of the pen woman are in jail after further investigation. 2: purchasing a car asymmetric information resulting in bad purchasing decisions.
