ECN 212 Study Guide - Midterm Guide: Sales Tax, Laffer Curve, Excise
Document Summary
Idea: seat belts cause more accidents (people think they are safer, so they drive more dangerously). Endangered species act sometimes causes extinction (potential land owners hunt more, so the animal is wiped out before land inspector arrives: human behavior: don"t ask or tell people what to do. If you want to move the mouse, move the cheese . Study of how prices signal market information, and incentivize human action. Prices set via market forces of supply/demand. At equilibrium, allocation of resources is socially optimal. Market forces can be stifled by regulation, externalities and a lack of competition. Even when stifled, market forces always push towards equilibrium. For now, all we have is this: The material wealth of our world is finite, and so is our time. This is known as scarcity; forces us to make a choice about how resources are used. If resources are used to make a plane, those cannot be used to make a car.
