9.7.10 Econ

9.7.10 Econ - Second price auction highest bidder wins, but...

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9.7.10 Economics Notes Economic Taste Economics perspective: religion succeeds in gaining adherence to consumer taste. New Age religions – increase your demand for crystals Islam – increase demand for prayer, decrease demand for bud light Hinduism – increase demand for beans, decrease demand for meat The United States do not prohibit cigars but they do a lot to make cigarettes distasteful by putting warning labels and high prices. Government can control the populace’s tastes. Some people are cultural icons that what they wear, do, etc. shifts the demand curve for the populace (Federer wearing a nike swoosh during a game) Dutch auction – auctioneer starts with a high asking price and lowers until meets demands of buyers. Descending price, first bidder wins English auction – auctioneer starts with low asking price and rises until meets highest demand. Ascending price, last bidder wins First price auction – highest bidder wins
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Unformatted text preview: Second price auction highest bidder wins, but pays the second highest price Arbitrage-The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. Greed Sellers are greedy so prices go up = wrong because greed doesnt change over time. People would rather have more than less (rational self interest) Economists believe most people act rationally. Boycott is when a group of people do not purchase a particular product. Demand curve for the product shifts to the left (decrease in Demand). Price fall and quantity consumed will shrink....
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