Marginal benefit is:

The value of one more unit of good or service.

Maximum amount willingly paid for another unit of a good or service. 

Resoures are allocated according to what majority of voters choose. 

Works well when decisions being made affect large numbers of people. 
Self-interest must be supressed to use resources most effectively. 

1.Contest

2.First-come, first-served

3.Lottery

4.Personal Characterisitcs

5.Force

1. Sporting events allocate money to best performers. Good when efforts of "players" are hard to monitor and reward directly.

2.ppl first in line, get resources. Works when a scarce resources can serve just 1 user at a time in sequence.

3. work best hwen there is no effective way to distinguish who deserves goods most. 

4. people with "right"characteristics get the job/resources. this method can be used to discriminate. 

5. war, use of military force to allocate resources, a nation. theft, taking property without consent.

The marginal benefit enjoyed by society - by the consumer of a good or service (marignal private benefit) plus the marginal benefit enjoyed by other (marginal external benefit)

Marginal Demand (curve) = Marginal Social Benefit. 

Area under MSB is consumer suplus. (but above equilibrium)

value (or MBenefit) of a good MINUS the price paid for it, summed over the quantity bought.

area under MSB and above eqiulibrium price. 

BARGAIN - paying less than you are willing. 

The price recieved for a good minus its minimum supply-price (MCost=OppCost), summed over the quantity sold.

Area above Marginal Social Cost or Market supply curve but below eqiulibrium price.  

Price exceeds Marginal cost, the firm recieves producer surplus. (PROFIT) 

The marginal cost incured by the entire society - by the producer and by everyone else on whoem the cost falls. It is the sum of marginal private cost and marginal external cost. 

MSC = Market supply curve

A scale to measure inefficiency. A decrease in totl surplus that results from an inefficient level of production. Underproduction can produce deadweight loss. 

The deadweight loss of overproduction is social loss.

Based on the following facts:

-Income can be transferred from people with high incomes to people with low incomes only by taxing the high incomes.

-Taxing ppl's income makes them work less.

-Working less makes quantity of labour go down. Less efficient as a result

-Therefore, quantity of capital is less than efficient quantity. 

Economic Pie Shrinks. 

Trade-Off is between size of economic pie (efficiency) and degree of equality with which it is shared.

Greater income redistribution through income taxes=> greater inefficiency => smaller pie. 

Principle that states that we should strive to achieve "the greatest happiness for the greatest number of people."

Price regulations - underproduction (ddwght loss)

Quantity regulations - underproduction 

Taxes: Increase price paid by buyers and lower price recived by sellers. D/C quntty produced. Lead to Underproduction.

Subsidies: Decrease price paid by buyers and increase price recieved by sellers. I/C quantity produced. Lead to Overproduction.

An externality is a cost or a benefit that affects someone other than the seller or the buyer. 

External Cost: Overproduction. 

External Benefit: Underproduction.

opportunity cost of making trades in a market is called "transaction costs."

When you wanna play tennis, you hang around until the court becomes vacant, and you "pay" with yoru waiting time. 

When transaction costs are high, the market might underproduce. long waiting time=not enough/high demand.

ideas about fairness can be devided into two groups: fair results and fair rules.

Fair-result ideas require income transfers from rich to poor: ie. Utilitarianism, Big Trade-off, Rawl's "making poor as well off as possible"

Fair-rule ideas require property rights and voluntary exchange. ie. state makes laws to prevent theft/involuntary exchnge. we must buy things to aquire goods. common property does nto work because the strongest will prevail and weak are poor.  equality of opportunity.