Post Lesson 10/Pre Lesson 11

Folks,

Read BE 89-91 and 112-117 and journal on this question: why would i pay more to buy a used car (the same make, model, miles etc) from a dealer than from an individual?

Don't forget your inital reflection paper is due next time.

thank you so much for today's lesson, check plus. Some major takeaways:

• Address the question that is asked. If you don't know what the question is your first step should be to clarify.
• Think about the incentives to all parties involved. think about how their actions always in the best light. In other words try to assume first that someone is doing something out of a desire to help and then explain why incentives result in a failure of that to happen.
• Premises matter to the incentives that you think are in place and the outcome you think will occur.
• Problematic premises (doing or believing X is bigotted) can prevent a discussion or dialogue alltogether.
• Nuance is important
• Prices convey information. If a government dictates prices then they are attempting to centralize all knowledge/information.
• There are three basic ways that prices change which we have talked about:
• Shifts in supply
• Shifts in demand
• artificial price controls (often via gov't intervention)
• each will have different effects on incentives, equilibrium and efficiency
• Prices and Profits/Losses are similar in that they convey information. Profits/losses tell owners/investors whether one should or should not stay in business or if they need to get better/more efficient at what they are doing. More to come next time
• Next time we'll focus on the value on profits/losses and start in on questions about when prices fail and what the best response is to such failures.