I thought today was a good discussion with good questions, you all really seemed to participate and that made the class go super fast, a check plus for the class as a whole. We mainly talked about the worksheet and the quiz...
1) the first thing to always realize is that there are two sides always at play (supply and demand) and affecting one side (forcing suppliers to provide something cheaper) will invariable also affect buyers in some way shape or form.
2) what is so bad about these "imperfect markets" and why is government so (often) terribly bad at fixing the problems when they have the ability to?
The answer all comes down to the knowledge that is conveyed. In a functioning market economy prices reflect economics because they reflect (ideally) true scarcity and alternatives or alternative uses (that is relative value). If prices are "messed up" then they are not communicating the right information about scarcity or alternative uses of time meaning that ultimately we get the wrong QUANTITY NOT THE WRONG PRICE!
Why can't government "fix" the problem? because they dont have the right sets of information either! Keep in mind that government is also a monopoly of sorts which is likely to be swayed by varied groups with different interests and biases. Government has no way to easily/cheaply "sort through" what is truly biased and not.... All of this isn't to say that government CAN'T be or ISN'T helpful...it's just harder than simply saying: well the price ought to be lower. How much lower?
3) it is not enough to say that a monopoly exists by just pointing out that only one company exists. what also needs to be answered is: i) are there alternatives? ii) are there barriers to entry in the market
one reason for barriers to entry might actually be laws and regulations while another might be large startup costs (think utilities/water companies)
4) when might a monopoly be "good?" think about economies of scale and start up costs. If we only allow for many "smaller companies" what will happen to quantity? why is it a good thing that we have patents?
5) the previous point led us to a graph: what does this picture mean...you need to be able to explain how/why a supply and demand graph looks the way it does. the model is meant to simplify and communicate information about a situation so we can evaluate how/what will be the effect of changes on the seven principles.
1) the first thing to always realize is that there are two sides always at play (supply and demand) and affecting one side (forcing suppliers to provide something cheaper) will invariable also affect buyers in some way shape or form.
2) what is so bad about these "imperfect markets" and why is government so (often) terribly bad at fixing the problems when they have the ability to?
The answer all comes down to the knowledge that is conveyed. In a functioning market economy prices reflect economics because they reflect (ideally) true scarcity and alternatives or alternative uses (that is relative value). If prices are "messed up" then they are not communicating the right information about scarcity or alternative uses of time meaning that ultimately we get the wrong QUANTITY NOT THE WRONG PRICE!
Why can't government "fix" the problem? because they dont have the right sets of information either! Keep in mind that government is also a monopoly of sorts which is likely to be swayed by varied groups with different interests and biases. Government has no way to easily/cheaply "sort through" what is truly biased and not.... All of this isn't to say that government CAN'T be or ISN'T helpful...it's just harder than simply saying: well the price ought to be lower. How much lower?
3) it is not enough to say that a monopoly exists by just pointing out that only one company exists. what also needs to be answered is: i) are there alternatives? ii) are there barriers to entry in the market
one reason for barriers to entry might actually be laws and regulations while another might be large startup costs (think utilities/water companies)
4) when might a monopoly be "good?" think about economies of scale and start up costs. If we only allow for many "smaller companies" what will happen to quantity? why is it a good thing that we have patents?
5) the previous point led us to a graph: what does this picture mean...you need to be able to explain how/why a supply and demand graph looks the way it does. the model is meant to simplify and communicate information about a situation so we can evaluate how/what will be the effect of changes on the seven principles.
No comments:
Post a Comment