Even though both a and b will be better off after

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: er off by $3 and B is better off by $2. » Even though both A and B will be better off after Even both and such transaction, in the absence of a market for tutorial places it cannot take place. » What about fairness? What Key Ideas Key Market failure Market » Market mechanism in most cases is the most Market is efficient way to allocate resources » Sometimes markets do not work very well – need Sometimes need for government intervention » Public Goods and Externalities (Ch.13) Public » Example: Emissions Trading Scheme (ETS) Example: Emissions proposed by the Australian Government proposed Key Ideas Key Opportunity Cost Opportunity » Scarcity implies that people must make Scarcity choices » In order to get something one needs to give In up something else » Opportunity Cost – value of the next best Opportunity value alternative » Example: instead of going to a lecture you Example: instead could have been working at @$20 per hour » Thus the OC of a 2 hour lecture is $40 Thus Key Ideas Key Thinking on the margin Thinking » In order to predict market outcomes we need to In make assumptions about people’s behaviour » Typically economists assume that people make Typically choices by comparing Marginal Benefit to to Marginal Cost (Cost-Benefit Analysis) » Marginal refers additional benefit or cost from Marginal additional benefit one additional unit of some activity additional unit Key Ideas Key Thinking on the margin Thinking » Maximizing behaviour: do something as long M...
View Full Document

This note was uploaded on 05/04/2013 for the course ACCY 231 taught by Professor G during the Three '12 term at University of Wollongong, Australia.

Ask a homework question - tutors are online