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1-handout - tutor2u Economics Blog - 10 Ways for a Great...

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tutor2u Economics Blog - 10 Ways for a Great Econ Paper Summer 2011 Copyright www.tutor2u.net 2011 Not for resale 1 Ways to Improve Your Economics Exam Papers tutor2u Economics Blog Summer 2011 10 (1) The Importance of the Margin In textbook economics – many decisions are made at the margin – Marginal revenue = marginal cost (profit max output) – Marginal social benefit = marginal social cost (social equilibrium) – Marginal utility of consumption compared to the price But few businesses / people have the capacity to reach such precise equilibrium points – or seek to find them Instead they satisfice or choose rules of thumb •B u t…… – Marginal changes in behaviour can have a big effect if enough people make them (e.g. Energy consumption decisions) – Changing behaviour ‘at the margin’ can have important social effects – social norms can change + policies can have an impact – The fundamental value of something depends on the value of the marginal unit
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a Great Econ Paper Summer 2011 Copyright www.tutor2u.net 2011 Not for resale 2 2: The Law of Unintended Consequences This is a root cause of ‘ government failure All government interventions in a market have at least one and often many unintended consequences Easy to have the benefit of hindsight when seeing this! Reasons: – Economics is a social science about behaviour – Rational agents will look for ways to offset policies that cost them – Information failure in government when setting policies – Dynamic nature of markets – markets and the agents that inhabit them move far more quickly than government – Disintermediation is inevitable in a globalized world 3: Stakeholders matter! ‘Any person or organization that has a legitimate interest in a specific project or policy decision.’ • Check to see the sources of information in data response questions • Identify and comment when value judgements are being made – scores high for evaluation • Risk of government failure: – Regulatory capture / powerful lobbying
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This note was uploaded on 02/08/2012 for the course ECO 3032 taught by Professor Danielomurgo during the Spring '11 term at FIU.

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1-handout - tutor2u Economics Blog - 10 Ways for a Great...

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