Econ11Fall2007NotesForLecture_2Sept10 - Lecture II: Notes...

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Lecture II: Notes For Sept 10, 2007; I. Review: "More of the Top Ten Ideas in Economics" II. Production Possibility Frontier Diagram – Linear Version III. Production Possibility Frontier – Non-Linear Version I. Review of additional "top ten" ideas in economics A. An important implication of the “opportunity cost” notion "There is no free lunch" or “You can’t do good without doing harm” B. Incentives matter - people respond to costs and prices 1. Why are new automobiles maintained better than old automobiles? Why are "antique” automobiles well maintained? 2. Why do so many people build their homes in coastline areas that suffer regular flood damage? 3. What will happen to the quantity of gasoline produced if the price of gasoline stays above $3 per gallon for some time? What will happen to the driving habits of motorists? C. Marginal incentives are very important – consider your decision to have another drink at a cash versus open bar. .. D. Price rationing – allows individuals to vary purchasing so that marginal cost = marginal benefit – is valuable. E. Economic growth is not automatic
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This note was uploaded on 04/18/2008 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.

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Econ11Fall2007NotesForLecture_2Sept10 - Lecture II: Notes...

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