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ECN 340 (22)
Chapter 2

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Ryerson University
ECN 340
Thomas Barbiero

Chapter 2: Application of Economic Theory Anything Worth Doing - People do things less well because of the added (marginal) cost - Writing a “C” paper is less costly than writing an “A” paper  more effort needed - Values of professor and students are different - What quality level to strive for? Why The Young go to University - Young more accustomed to routine of school? - Young do not have family responsibility? - Young realize the value of education? - Young intellectually more alive? - The answer? Young’s opportunity costs lower - Young’s benefits larger gains for longer period of time Students Walking on the Grass - Most people enjoy a beautiful lawn. So why do people walk on it? - Grass may be a short cut, thus can bring benefits - Marginal cost is close to zero if the path already there - Most people think that if they ALONE walk on the grass, the MC will be close to zero - Path created without anyone wanting it Pollution - Pollution may be rational if other’s behaviour cannot be controlled escalation can occur. Why? - Each person asks: if I stop polluting but everyone else does not, what’s the use? - Noise in a restaurant why does the sound lever go higher and higher? Everyone wants to be heard, looking out for own interests. - Why in a large group of people no one helps out a victim?  Costs to helping out, assume others will help The Economics of Panics - What is rational for an individual to do in a panic situation? E.g. fire - No one in a position to take charge and co-ordinate - It is “rational” to panic. Explain why? Reckless Driving - Cost and benefits of driving includes probability of getting into an accident - Airbags reduce probability of death reduce cost of careless driving - Thus airbags and seatbelt will decrease private costs but increase social costs - Cost of reckless driving born by others - Take a dagger and put it on a steering wheel likely outcome? People drive more carefully. Conclusions - People respond to costs in a predictable way - The action of individual people are often seen as inconsequential, thus people pollute, unless there is some form of control Questions to Ponder - Explain why there is congestion on highways.  the cost is low, people don’t think they’ll contribute to the congestion. - Why can water shortages occur during long dry summers? How can we avoid such shortages? increase the cost of water Chapter 7: Sexual Behavior - Sex is simply another service that is wanted and supplied Economic Characteristics of Sex - Sex as a service - Holding hands - Kissing - “Petting”  Touching - Intercourse Different Sexual Practices - Immoral? – value judgement, not immoral - A matter of taste Intensity - For most, it is the intensity of the sexual experience that make it so appealing - Most willing to pay higher cost to experience it compared to having a peanut butter sandwich - Interpersonal utility comparisons impossible to do  cannot compare peoples pleasure level Law of Demand and Sex - As price rises, quantity demanded falls - Prostitutes know this very well: higher price, fewer “tricks” - Men demand more units of sex as price drops Women and Sex - Generally, women want less sex, although it depends on cost - Men’s job is to decrease cost of sex and increase quantity demanded - Contraceptives have greatly reduced the cost of sex, therefore sexual activity is up Cost of Sex - Opportunity costs o Time o Energy o Risk of pregnancy o Risk of STD’s o Other costs? Guilt? Sex and the Rich and Poor - Who has more sex the rich or the poor?  Rich have more sex - Higher income groups consume (produce) more sex Sex as a Co-Operative Experience - Must be co-operatively produced and enjoyed - Thus, we look for someone who performs - Joint nature means pursuing same goal - For the particular sexual activity, no competition between the two Sex as an Exchange - A person can exchange sex for security, clothes, kindness, marriage, etc - Since supply of sex upward sloping, we need to pay more to get more sex nd - In U.S, coital frequency peaks in 2 week of February – Valentine
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