Musical Chairs

2. Musical Chairs • Movie Theater example • Chain letter

3. Contingent Behavior • Contingent behavior exists when each person's actions depend on what he expects others to do.

4. Multiplier Effect - Changing the instructions of one person changes the behavior of others

5. More Contingent Behavior • equilibrium condition - exists when the system is at rest and has no further tendency to change. • Disequilibrium – when an equilibrium is not stable. An individual can change the group. • Contingent behavior also may explain the wide price fluctuations in some speculative markets, such as that for gold

6. Production Possibilities • Scarcity is the basis of many economic concepts because it constrains or limits our behavior. •  production-possibilities frontier separates outcomes that are possible for an individual (or a group) to produce from those that cannot be produced.

8. something you sacrifice to have more of something else

9. Exchange and Consumption • "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinners but from their regard to their own interest. We address ourselves not to their humanity but to their self love, and never talk to them of our own necessities but of their advantages.“ $$$

10. Give an example of how people try to change the system of constrained behavior. • Gov’t incentives (farmers?)

11. By-Product • When a person tries to achieve his goals, side-effects or by-productssometimes occur that affect others. • Production – pollution/money • Coal – electric (not always harmful) • Externalities - name for byproducts or spillover effects • externality exists when either an unintended cost is imposed or an unintended benefit is given in the process of producing or consuming.

12. The Commons • The problem of the Commons – when there is no mechanism or incentive to prevent the overuse and depletion of the commonly-held resource. • deforestation to depletion of the ozone layer – how?