Wednesday, September 20, 2017

10:14 AM

    Outline- reminder PS1 due 9/26 noon

    1. Exercise
    2. Trade
      1. Why? (advantage)
      2. Impact?

cars

    1. Trade
      1. Trade = exchange.  Exchange happens all the time in an econ.
        1. Is exchange good or bad?

    Is there freedom? No.  Bad.

    Yes - is everything known?  No, it could be bad

    Yes - exchange is very likely good.

     

    Ex: coffee is $2.50, I know everything about it.  Exchange will only happen if buyer's valuation > $2.50.  seller's valuation < $2.50. 

     

    Buyer benefit = her or his valuation - $2.50

    Seller benefit = $2.50 - her or his valuation

     

    Everyone benefits.  Pareto improvement.

     

    1. Note: barrier to trade or exchange will harm buyers and sellers.

 

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