Class Summary 11/16

The Challenge

The main problem is scarcity and the "price system" regulates this.  If we all have different willingness of what to pay some businesses will lose money, it's a cost. Market prices force us to consider somebody else. Someone is willing to pay a high price which is why they charge and price goods the way they do. Companies have to capitalize on high demand because of incentives.

When goods are scarce how do we ration goods?

1. Need

How do you convey what people need? This is costly and invasive. Won't satisfy it's own condition. 

2. Queues

The line is a price for some people but everyone has a somewhat equal chance.

3. Lottery

People who value the good the most won't get it. People who need the good the most won't get it because of the lottery system.

4. Equal Share

Everyone produces and it gets split equally. Making for communism.

5. "Kickin' Ass"

You can't plan for anything because you don't know what has to happen to get the good.

6. Merit

Wouldn't want to trust anyone to determine merit. How do we know what to merit? A society in which a person is valued for their effort and not the value they produce then we're going to have the "100 mile suit". There are real down sides to choosing the meritorious route. 

Evaluation of Rationing Mechanisms

"Where does competition come from?"

1. What is nature of competition; constructive or destructive?
2. How does mechanism impact supply (Q)?
3. Other considerations