LectNotes-2-EconProbRation-Sept20-2330

LectNotes-2-EconProbRation-Sept20-2330 - THE NATURE OF THE...

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THE NATURE OF THE ECONOMIC PROBLEM Prof. Salazar Sosc 2330 –Econ of Law September 20, 2010 Session/Week 2
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2 OBJECTIVES Understand and assess the economic conditions and economic rationality that may be subject to regulation by the law: Scarcity Market exchange Rational Behaviour Understand how the law may relate to the economic conditions and economic rationality Law reflects and regulates economic conditions and rational behavior Case Study: Consumer Bankruptcy in Canada
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3 MARKET BEHAVIOUR Rational Behaviour e.g. consumer behaviour, Corporate behaviour LAW IF LAW IS TO REGULATE A MARKET, WHAT IS MARKET BEHAVIOR LIKE? Economic ideas of ‘Rational Behaviour’ & Exchange inform law
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“..more than satisfying own interest…” ECONOMIC THEORY OF MARKET BEHAVIOR
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5 RATIONAL BEHAVIOR Maximizing/Satisfaction of individual utility (feeling, profit, wealth, material things) Marginal utility : additional satisfaction/benefit/profit for additional unit, preference: subjective Incremental Substitution : subjective, imperfect, less of one for more of other. Opportunity cost : use of limited resources incurs cost of foregone alternatives (alternative marginal utility/benefits foregone) Diminishing Returns : beyond some point, more inputs result in disadvantage e.g. the more you consume, the less satisfaction
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6 RATIONAL BEHAVIOR Marginalism : focus on proportion e.g. health services but also recreation (marginal utility instead of total utility, how much of each option depending on required benefits of each) Cost : given economy as rationing inadequate supplies and incremental substitution) Price : transmits changing values associated with substitution Physical fallacy : relocation of things in time and space affects value (e.g. middleman has knowledge, stores and re-sells at higher price)
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CONSUMER Hungry? Income? Price? Or try pizza? How many? PROVIDER Demand? Costly supply? Profit? Or try clothing industry? How much supply? INVESTORS Stock price? Return? Long-term profitability? Or try Vodafone? How much in McDonald’s?
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This note was uploaded on 11/16/2010 for the course NATURAL SC NATS 1505 taught by Professor Isley during the Spring '10 term at Columbia State Community College.

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LectNotes-2-EconProbRation-Sept20-2330 - THE NATURE OF THE...

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