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Introduction (Economics (allocate scarce resources (scarcity (every choice…
Introduction
Economics
allocate scarce resources
scarcity
every choice comes a cost
so trade-off
at the margin
margin: additional
Marginal Cost
Marginal Benefits
important idea
thinking at the margin
unlimited demand
Model
all assumptions
abstraction
! fit the data ! to predict!
positive v.s. normative economics
positive economics
normative
values, policy advisers
The cost-benefit principle
implementation
prediction
goal & constraint
Inference
observe
Policy
change preference
change resource constraints
Incentives Matter
rewards & penalties
Trade-offs are everywhere
the opportunity cost of a choice
the value of the best alternative lost
Prisoner Transport Business
Good institutions Align Self-interest with the Social Interest