Essay on Basics of Economics
Undressing the Dismal Science
( AP economics summer assignment )
1a. “Individuals seek to maximize their own utility.” Explain this basic economic principle.
b. Discuss several of the conflicts / choices, as discussed by Wheelan, that individuals may face in trying to maximize their utility. Economists would basically do whatever it takes to gain privileges or derive utility. For example, they would pay taxes or get a doctor’s shot. Doing those things isn’t exactly pleasant, but you would do it for escaping future consequences if it’s not done. If you don’t pay your taxes, you go to prison; if you don’t get a doctor’s shot in time, you get ill. All economists have different tastes …show more content…
4a. Explain the meanings of market failure and negative externalities. b. Discuss the arguments, pro and com debating the appropriateness of taxes to discourage gas – guzzling vehicles. Market failure is when the market fails so it encourages people and firms to “cut corners,” but in the end result it makes society worse. For example, when a family walks in a plane with their two noisy children, they have no guilt whatsoever because they’re not paying extra for noise that the children make so the others surrounding them just have to bear it. That’s when negative externality comes in. The others surrounding the noisy children paid the exact same price as the other people in the front of the plane where they don’t have to listen to the annoying children’s voices, but they’re the only one getting a negative impact. Negative externality is when either the private cost or social cost is negative and the difference between those two don’t really match up with each other. In other words, “not getting the best for your buck.” Talking about externalities, there’s another big issue that relates to it. SUV’s has been a helpful van to those who need it, or a gas-guzzling hunk of metal