Describe 3 examples of how incentives can result in negative or unintended consequences.
While incentive is a main drive in the economy, it can sometimes lead to unintended or bad consequences. One example of how incentives can result in a negative outcome is when an incentive encourages an illegal or forbidden action. This can take the form of selling or buying illegal things or killing animals simply in order to make a profit. When someone's incentives motivate them to commit a crime or do an unethical thing, it has resulted in negative consequences. Another example of a negative consequence due to incentives is an incentive that ultimately hurts the economy as a whole. Finally, an example of unintended consequences resulting from incentives would be an incentive that leads to destruction. This could happen when an incentive motivates someone to do environmental, global, or personal damage.
Tuesday, September 11, 2012
Thursday, September 6, 2012
Power Market
Using Wheelan as a guide, discuss how economic decisions about what to produce, how to produce, and how much to produce are made.
In Naked Economics, Wheelan's first chapter discusses broad issues regarding economics, including the principles of market and production. In the economic context, many decisions must be made constantly in order to be successful in the marketplace. First, decisions about what to produce are based on the demand of the consumers. If a certain good is in high demand, it is more likely that it will sell and therefore it is a good product to make. Decisions regarding how to produce these things are made assuming the principle that everyone acts to maximize their own wealth. Since this is the case, products are to be produced in the cheapest manner and in a way that will minimize the producers costs. In order to choose how much of a good to produce, one relies upon demand of the consumer once again. If a producer is selling all of his goods at a reasonable price and making a steady profit, it makes sense that he should produce a larger volume of his product because since his goods are popular, they will be bought. On the other hand, if someone is unable to sell the amount of goods they have initially at a set price, they must make less goods so that they do not lose profit on the extra product that is not selling. In general, economic decisions about what to produce, how to produce, and how much to produce are made on the basis that one is trying to maximize his or his companies wealth. Also, these choices are made in order to reflect the actions of consumers, so that if demand is higher, production must also increase, and vice versa.
In Naked Economics, Wheelan's first chapter discusses broad issues regarding economics, including the principles of market and production. In the economic context, many decisions must be made constantly in order to be successful in the marketplace. First, decisions about what to produce are based on the demand of the consumers. If a certain good is in high demand, it is more likely that it will sell and therefore it is a good product to make. Decisions regarding how to produce these things are made assuming the principle that everyone acts to maximize their own wealth. Since this is the case, products are to be produced in the cheapest manner and in a way that will minimize the producers costs. In order to choose how much of a good to produce, one relies upon demand of the consumer once again. If a producer is selling all of his goods at a reasonable price and making a steady profit, it makes sense that he should produce a larger volume of his product because since his goods are popular, they will be bought. On the other hand, if someone is unable to sell the amount of goods they have initially at a set price, they must make less goods so that they do not lose profit on the extra product that is not selling. In general, economic decisions about what to produce, how to produce, and how much to produce are made on the basis that one is trying to maximize his or his companies wealth. Also, these choices are made in order to reflect the actions of consumers, so that if demand is higher, production must also increase, and vice versa.
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