Micro Notes 1/17/12

Micro 1/17/12

Quiz on Thursday

Pure market economy—————————————–Pure command economy
-only role of govt is protecting -no private property rights
property rights -society owns everything
-NOT anarchy -govt controls all

Mixed economy between these two extremes

Pure market economy
-what to produce?
– demand (allows for sale of “illegal” drugs, prostitution, child porn, etc.)
-how to produce?
– to maximize profit (pi symbol)/ (sweat shops, child labor, pollution)
-positive: promotes “super” efficiency
-Who gets it?
– ppl willing and able to pay ($$$)/ (leads to ultra poor for those who can’t work & starve to death)

Pure command economy
-what to produce?
– what govt decides is best for society (ppl don’t get what they want)
-how to produce?
– whatever govt says (no reason for efficiency)
-who gets it?
– everyone gets equal distribution (no motivation/incentive to work)

Deadly Disease
-100 kids live in the country
-all sick
-80% death rate
-100 pills
-1 pill drops chance of death to 20%
-2 pills drops chance to death to 19%
4 questions?
1. what would happen in a pure command economy?
– 1 pill per child
– give the more productive the pills (selection)/none (kill disease on island)
2. what would happen in a pure market economy?
– whoever pays the most… inventor/company gains, poor lose
– chaos/charity buys & distributes/placebos made
3. what does this discussion say about AIDs in Africa?
– subsidize medications (decrease cost in production… where does the money come from?)
– drive down cost (technology)(remove patent)(problem: no incentive)
– education
4. what type of market does universal health care fall into?
– market problem (not enough $$), ***command to fix a market problem***
-T/F question, it usually ends bad


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