01 - in tax Example Activity = x = driving to target Extra...

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January 07, 2009 We learn economic due to scarcity (limited resources) need to make choices and have trade-offs Scarcity principle : there’s boundless needs and wants, resources are limited having move of one thing means having less of another thing How do people make choices? o Cost-benefit principle : an action should be taken if the extra benefit of that action are at least as great as the extra costs Example : airline safety Amount of airline safety is due to cost Example : crime rate 0% crime rates means an increase in police force and that means an increase
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Unformatted text preview: in tax Example Activity = x = driving to target Extra cost of doing x vs. extra benefit of doing x Alarm clock $20 at bookstore $10 at target Extra benefit- $10 (what is saved) Extra cost- time, gas, safety - how to quantize these ? Think of the minimum amount one would pay someone to do the activity o Suppose the extra cost is $8. Therefore, the economic surplus : the difference between extra benefits and extra cost of doing the action o Economic surplus = extra benefit - extra cost = $10 - $8 = $2...
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This note was uploaded on 03/30/2009 for the course ECON 1 taught by Professor Tang during the Winter '08 term at UCSD.

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01 - in tax Example Activity = x = driving to target Extra...

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