What is the first assumption of economics? Why is it so critical to what we do?
The very first assumption of economics is that individuals act to make themselves as well off as possible. Individuals seek to maximize their own utility. This assumption is critical to what we do because every decision we make is based on this assumption. Everything we do is based on how much utility we get from something.
What does Wheelan mean when he states that “every market makes everyone better off”?
When Wheelan states that “every market makes everyone better off”, he means that both the firms and consumers act in their own best interests. They make decisions that benefit themselves the most.
Why do people kill black rhinos?
People kill black rhinos for their horns, they do this because they can make a lot of money relative to the risk of getting caught. They kill rhinos because they derive large amounts of utility thus, making them better off.
Why are self-interests and incentives important?
Self-interests and incentives are important because it drives us to do what we do. For example, when we are paid on commission, we work harder, and if the price of gasoline rises, we drive less. Our incentives and self-interests is what gives us the most utility and keeps us “well off”.
What are externalities?
Externalities are gaps between the private cost and the social cost of some behavior.
China recently decreed that it would tax government employees not not smoking. What evidence/reasoning has Wheelan presented in chapter 3 might support this effort?
China might have decreed that it would tax government employees for not smoking because snoking somewhat contributes to the country’s economy. Smokers die earlier than non-smokers, which means that smokers pay into Social Security and private pension funds but they don’t live very long to collect the benefits. In 2001, they released a report on the Czech Republic...