Description
Question 1: Explain how markets 1) carry information and 2) create incentives. Describe an example (hypothetical or real) where prices change people’s behavior in efficient manners (think to the examples at the end of chapter 3’s lecture). Make sure you use the correct vocabulary to describe how markets adjust to carry information and create incentives (quantity demanded vs. demand, etc.), and think through the shifter list from the lecture to describe the changes in those terms. Can use this video to help: https://www.youtube.com/watch?v=mr2fexY-utY&t=1s Question 2: With countless people competing for the same resources (think about tennis racquet manufacturers and car manufacturers both wanting graphite), how do we determine who gets the resources? Compare and contrast the results that you would expect from allowing flexible prices to determine who gets the resources with the expected results from using an all-knowing, all-powerful planner and with the expected results from using a not-all-knowing, not-all-powerful planner.