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 may be rational if other’s behaviour cannot be controlled escalation can occur.
- 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?
- 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.
- 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
- “Petting” Touching
Different Sexual Practices
- Immoral? – value judgement, not immoral
- A matter of taste
- 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 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
- In U.S, coital frequency peaks in 2 week of February – Valentine