Nt1310 Unit 2

In general, the reading and the AP textbook both contained the same economic concepts, but they sometimes used different terminology and economic models to explain them. One similarity was the concept that ‘everything is scarce and that all individual and firms seek to maximize their utility and benefits. Unit 3 started with an interesting historical overview of workdays and how it had decreased throughout the world due to technological factors and norms. The highlight of the Unit was explaining the interrelation between the concept of utility maximization and the feasible frontier, rather than separately. It explains how we can determine a person’s preferences of how much hours they want to work (or study) simply by setting the marginal

rate of substitution (MRS) and the marginal rate of transformation (MRT) equal to each other. The reading did a good job explaining it using step-by-step graphical conceptualization of what will happen when there is a change in situation like wage, whether there will be a greater allocation towards freetime. In the end, the idea of graphing this concept is really impractical because much of utilization maximization happens without anybody thinking about it. Though, these concepts did play nicely to the explanation of why people tended to work more or less during American history.
Unit 12 of the reading closely resembles the market failures part of AP textbook, which talked about the positive and negative externalities of markets and remedies to correct it.

Some provided examples of externalities were second-hand smoking, pesticide, and the post-antibiotic crisis. One of the remedies for a negative externality was compensation, which for one of the examples--the banana plantation owners and fishermen--I felt was unrealistic and weak. The idea was to reduce the negative externalities or the marginal social cost of polluting the fishing waters by reducing the output of bananas, which is compensated with money. It eventually reduces the output of bananas to the point in which the marginal social cost equals the market price for bananas. The transaction would work if both groups are in agreement and there are no barriers to information. That’s just unrealistic. Since the pesticide for growing bananas is legal and the fishermen are asking the plantation owners for help, the fishermen have considerably less bargaining power, making compensation difficult to execute. In addition, the pesticide is also a destroyer of environments, fishermen industries, and human health, so I would expect the the marginal social cost to be way higher. No bother placing a tax on it for monetary gain or for Pareto efficiency; rather, it’s better to ban it due to huge long-term negative

externalities.
Unit 12 also includes the explanation of what a public good is, which is something that “does not reduce its availability to others” and has the characteristics of being non-rival and non-excludable. Compared to the textbook, there are additional categorizations of goods such as the common-pool resource as well as a public bad. One thing that was should have been emphasized more is the social dilemma of public good and it's free-riders. Although it’s great that a public good allows more people of any social standing to use it whenever, it creates self-interest because no one’s willing to pay for the public good. As a result, non-excludable goods suffer from low production and sometimes lacks maintenance. This could be a problem especially if many people use the public good.
Towards the ends of the units, the reading provides videos that I have enjoyed because they were understandable and complemented with the entire unit. Most of them I watched realistically addressed world economic topics and applied economics to provide insight. Some were provocative like the one which talked about markets and its influence in our civil life.