Class summary 10/7

Marginal cost: the change of cost when you make a choice

Water & Diamond paradox

Marginal value and total value

teacher is far more abundant than a baseball player

-if you randomly took 209 teachers out of education system and if you took 200 NBA players, the quality of teaching in the country will not change a lot, but the quality of the NBA will be worse

total value of teacher is > total value of NBA players (proof later by picture)

marginal value of teacher is < marginal value of NBA players

sunk costs opposite to marginal cost

cost never changes: resources that are not recoverable at all when make decision

Humans act with purpose

people respond to incentives (dropping dollars around the room)

People’s responds to incentives will change when the benefit and cost change

"law of unintended consequences"

people rational respond to benefit and cost cause the unintended consequences

 unintended consequence example:

mandatory seat belt,how does change the benefit and cost change

impact on cost of driving

accident,you are more likely to survive(change the cost of bad consequence)

but people may drive less carefully,drive more quickly,more accidents since the seat belts, more injuries due to driving

There is nothing free in the world at all.