MGMT 202 1st Edition Lecture 12 Outline of Last Lecture I. Economics vs. EngineeringII. Neoclassic Assumptions About HumansIII. Macro vs. Micro EconomicsIV. Neoclassic EconomistsOutline of Current Lecture I. Assumptions of Neoclassic EconomicsII. Market EconomiesIII. Limitations with Classic Economic ThoughtCurrent LectureAssumptions of neoclassic economics:-Government shouldn’t intervene in economics – it’s unnecessary and inappropriate -individuals can freely pursue their self-interest (like Smith’s theories)-markets discipline private economic activity-profit alone determines corporate performance/success-the primary contributions from firms to society are creating wealth, jobs, paying taxes, and delivering goods and servicesMarket economy – should have choice, competition, efficiencyCell phone companies, airlines, and rental car companies are reducing in numberLeast # you should have is 3 – getting dangerously close to monopolyNegative externalities – bribery, administered pricingLimitations with classic economic thought:Practical– some parts of society are excluded (poor); damaging/hazardous effects to individuals Theoretical (Hosmer) – greatest good for greatest number accepts that there are people who don’t get their rights or benefits; people are treated as means to an end (can be somewhat abused if profits are prioritized over people)Combined– cost effective analysis (the end is already decided and we have to determine if the cost is worth it – example, cotton harvesting is very harmful to the health of the peopleharvesting it but worker safety is not the most important when weighed with cost); supply/demand and “dependence effect” (what if supply is not a function of demand but vice
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