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【正文】 spending on education increases as spending increases ?Tax payments to provide more education increase as well 169。2020 Pearson Education, Inc. Chapter 18 78 Determining the Level of Educational Spending Educational spending per pupil $0 Willingness to pay $ $1200 $600 $1800 $2400 AW The efficient level of educational spending is determined by summing the willingness to pay for education for each of three citizens. Will majority rule yield an efficient oute? ?W1 will vote for $600 ?W2 and W3 will vote for $1200 The median vote will always win in a majority rule election. W2 W3 W1 169。2020 Pearson Education, Inc. Chapter 18 79 Private Preferences for Public Goods ?Question ?Will the median voter selection always be efficient? ?Answer ?If two of the three preferred $1200, there would be overinvestment ?If two of the three preferred $600, there would be underinvestment 169。2020 Pearson Education, Inc. Chapter 18 80 Private Preferences for Public Goods ?Majority rule is inefficient because it weighs each citizen’s preference equally ?The efficient oute weighs each citizen’s vote by his or her strength of preference Chapter 1 Preliminaries 169。2020 Pearson Education, Inc. Chapter 18 82 Introduction ?What are the key themes of microeconomics? ?What is a market? ?What is the difference between real and nominal prices? ?Why study microeconomics? 169。2020 Pearson Education, Inc. Chapter 18 83 Themes of Microeconomics ?Microeconomics deals with limits ?Limited budgets ?Limited time ?Limited ability to produce ?How do we make the most of limits? ?How do we allocate scarce resources? 169。2020 Pearson Education, Inc. Chapter 18 84 Themes of Microeconomics ?Workers, firms and consumers must make tradeoffs ?Do I work or go on vacation? ?Do I purchase a new car or save my money? ?Do we hire more workers or buy new machinery? ?How are these tradeoffs best made? 169。2020 Pearson Education, Inc. Chapter 18 85 Themes of Microeconomics ?Consumers ?Limited ines ?Consumer theory – describes how consumers maximize their wellbeing, using their preferences, to make decisions about tradeoffs ?How do consumers make decisions about consumption and savings? 169。2020 Pearson Education, Inc. Chapter 18 86 Themes of Microeconomics ?Workers ?Individuals decide when and if to enter the workforce ? Tradeoffs of working now or obtaining more education/training ?What choices do individuals make in terms of jobs or workplaces? ?How many hours do individuals choose to work? ? Tradeoff of labor and leisure 169。2020 Pearson Education, Inc. Chapter 18 87 Themes of Microeconomics ?Firms ?What types of products do firms produce? ? Constraints on production capacity and financial resources create needs for tradeoffs ?Theory of the Firm – describes how these tradeoffs are best made 169。2020 Pearson Education, Inc. Chapter 18 88 Themes of Microeconomics ?Prices ?Tradeoffs are often based on prices faced by consumers and producers ?Workers make decisions based on prices for labor – wages ?Firms make decisions based on wages and prices for inputs and on prices for the goods they produce 169。2020 Pearson Education, Inc. Chapter 18 89 Themes of Microeconomics ?Prices ?How are prices determined? ? Centrally planned economies – governments control prices ? Market economies – prices determined by interaction of market participants ?Markets – collection of buyers and sellers whose interaction determines the prices of goods 169。2020 Pearson Education, Inc. Chapter 18 90 Theories and Models ?Economics is concerned with explanation of observed phenomena ?Theories are used to explain observed phenomena in terms of a set of basic rules and assumptions: ? The Theory of the Firm ? The Theory of Consumer Behavior 169。2020 Pearson Education, Inc. Chapter 18 91 Theories and Models ?Theories are used to make predictions ?Economic models are created from theories ?Models are mathematical representations used to make quantitative predictions 169。2020 Pearson Education, Inc. Chapter 18 92 Theories and Models ?Validating a Theory ?The validity of a theory is determined by the quality of its prediction, given the assumptions ?Theories must be tested and refined ?Theories are invariably imperfect – but gives much insight into observed phenomena 169。2020 Pearson Education, Inc. Chapter 18 93 Positive amp。 Normative Analysis ?Positive Analysis – statements that describe the relationship of cause and effect ?Questions that deal with explanation and prediction ? What will be the impact of an import quota on foreign cars? ? What will be the impact of an increase in the gasoline excise tax? 169。2020 Pearson Education, Inc. Chapter 18 94 Positive amp。 Normative Analysis ?Normative Analysis – analysis examining questions of what ought to be ?Often supplemented by value judgments ? Should the government impose a larger gasoline tax? ? Should the government decrease the tariffs on imported cars? 169。2020 Pearson Education, Inc. Chapter 18 95 What is a Market? ?Markets ?Collection of buyers and sellers, through their actual or potential interaction, determine the prices of products ? Buyers: consumers purchase goods, panies purchase labor and inputs ? Sellers: consumers sell labor, resource owners sell inputs, firms sell goods 169。2020 Pearson Education, Inc. Chapter 18 96 What is a Market? ?Market Definition ?Determination of the buyers, sellers, and range of products that should be included in a particular market ?Arbitrage ?The practice of buying a product at a low price in one location and selling it for more in another location 169。2020 Pearson Education, Inc. Chapter 18 97 What is a Market? ?Defining the Market ?Many of the most interestin