6 Market Economy
16
The Market Economy Utility, Preferences, Profits and Incentives
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Transcript of 6 Market Economy
Normal Goods vs. InferiorGoods
• As incomeincreases,consumptionincreases.
• As incomeincreases,consumptiondecreases.
Is it fair for those of us who livecomfortably to impose ourpreferences on individuals in thedeveloping world?
Utility
• People act to increase their utility atall times.
• Why is this not the same as beingselfish?
Prices Transmit Information
• How do prices transmit information?• What happens when demand goes up
for a product? What does that tellthe producer?
• What happens to the prices oforanges in Ohio when a hurricanehits Florida? Why?
• What happens to the price of lumberand other construction equipment inFlorida during an active hurricaneseason?