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Naked Economics

In: Business and Management

Submitted By fernandomtz21
Words 917
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1.) One main point the Author argues is the rhetorical question, “Who feeds Paris?” He is trying to explain how the modern economy works, which is all about the prices. The Author uses the example if Patrons start ordering more of the sashimi appetizer, the restaurateur will notice the popularity and place a larger order with his fish wholesaler. The new popularity and demand of the fish will in turn make the wholesale price to go up. As a result, the fisherman will be paid more for their catch of the more popular fish. One very important assumption the Author makes is that individuals act to make themselves as well off as possible. Individuals seek to maximize their own utility. My understanding is people do whatever gives them satisfaction. In turn, it influences people’s decisions. Another powerful assumption made by the Author was that firms try to make as much money as possible. Firms take inputs and combine them in a way that adds valve. The Author used the example of Brad Pitt, trying to show a powerful feature of a market economy that directs resources to their most productive. The Author asked “Why doesn’t Brad Pitt sell automobile insurance?” Because Brad Pitt would make more money in Hollywood then selling insurance policies. One more main point is made with the discussion of the term “price discrimination.” I believe “price discrimination” is a genius idea. Selling the same item at different prices to different people. Why would firms do that? Consumers try to make themselves as well off as possible and firms try to maximize profits. Simple concepts. 2.) Incentives are important because it was induces action or motivates effort. Incentives determine human action and therefore economic outcomes. I think without incentives we wouldn’t know what does and does not work for our society. The author uses...

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