ends up getting its expected, normal return instead of the high returns one would expect with high fares. What will adjust is simply the number of cabs and the fraction of the time they actually carry passengers. Cabs will get more for each rider, but each cab will have fewer riders. Other situations of rent seeking occur when artificially high urban wages attract migrants from rural areas. If the wage does not adjust downward to equate supply and demand, the rate of urban UNEMPLOYMENT will rise until further migration is deterred. Still other examples are in banking and drugs. When the “margin” in banking is set too high, new banks enter and/or branches of old ones proliferate until further entry is deterred. Artificially maintained drug prices led, in several Latin American countries (Argentina, Chile, and Uruguay before their major liberalizations of recent decades), to a pharmacy on almost every block. Rent seeking also occurs when something of value (like import licenses or radio/TV franchises) is being given away or sold below its true value. In such cases potential buyers often spend large amounts “lobbying” to improve their chances of getting the prize. Indeed, a broad view of rent seeking easily covers most cases of lobbying (using real resources in efforts to gain legislative or executive “favors”). The great unifying principles of microeconomics are, ever and always, supply and demand. The normative overtone of microeconomics comes from the fact that competitive supply price represents value as seen by suppliers, and competitive demand price represents value as seen by demanders. The motivating force is that of human beings, always gravitating toward choices and arrangements that reflect their tastes. The miracle of it all is that on the basis of such simple and straightforward underpinnings, a rich tapestry of analysis, insights, and understanding can be woven. This brief article can
only give its readers a glimpse—hopefully a tempting one—of the richness, beauty, and promise of that tapestry.
SAINT JOSEPH INSTITUTE OF TECHNOLOGY Butuan City EXPANDED TERTIARY EDUCATION EQUIVALENCY ACCREDITATION PROGRAM (ETEEAP) N otes on the C ommon M icroeconomic P roblems in the P hilippines
Submitted by: SIM A. BELSONDRA BS Business Administration (majors in Operations Management) Submitted to: Dr. Jenny Lyn Tindugan-Nalupa Professor
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