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Reaction Paper #1

Reaction Paper #1 - Cassie Morgan ECON-200-001 Professor...

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Cassie Morgan ECON-200-001 Professor Park 4 February 2008 Reaction Paper #1 Naked Economics: Incentives play a very large role in any decision that a person makes, especially economical decisions. If there is not a worthwhile incentive that appeals to the decision maker, then they will not be willing to proceed with the decision. A good incentive allows a person to maximize their utility, which means that they will be able to gain as much from a situation as possible. Every decision that we make has some type of trade- off that can allow us to maximize our utility. Not every decision that we make will benefit us to the fullest though. A market will be effective if they use their resources to the best of their ability while still creating an incentive that will draw in the customers. If there is no incentive for the customer to purchase a product, such as a low price or better quality than a supplemental good, because then the customer will purchase the product form another customer if it is more beneficial for the customer. Often times when we make decisions, we will have to give up something else in order to do something. An example, as stated in the book on page 8, would be paying for
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