Overview of Actions and Results

Reading Selections:

• Musical Chairs
• Contingent Behavior
• More Contingent Behavior
• Production Possibilities
• Exchange and Consumption
• By-products
• The Commons
• Sample Quiz

• Alternatives and Supplements
• Videos

Glossary
Who's Who

 

People's actions can have surprising results. If they did not, there would be little for economists to study. This group of readings considers some situations in which unexpected results can come from interactions of people's actions. In the process of looking at these situations, you meet a number of concepts that are fundamental to the economic way of thinking.

We begin with a short discussion of cases in which matching problems constrain the system so that certain results occur regardless of how people behave. Next is a two-part presentation of contingent behavior, or situations in which the behavior of each person depends on the expected behavior of others. Then, we examine situations in which constraints force people to a result they do not necessarily want in their efforts to get something that they do want. This part begins by explaining what a production-possibilities frontier is. We end with a brief look at situations in which an unintended result is a side-effect of other actions.

• Define the following terms: multiplier effect, equilibrium condition, adjustment process, production-possibilities frontier, and budget constraint.
• Explain what an identity is and give examples.
• Distinguish between an unstable and a stable equilibrium.
• Explain why the system of market exchange can be considered as a system of constrained behavior.
• Explain the logic behind the problem of the commons.
• If given a simple model of contingent behavior in the form of a table, be able to determine positions of equilibrium.