We experience scarcity because:
What resource is most scarce for
Well, for me
different if you
had 6 more
How do we cope with scarcity?
We make choices
How do we choose?
that people make
rational choices that
they believe will
Is that actually true?
Not always, we make many irrational
But more often than not, people act
in their own interest
The Evolutionary argument: If they don’t, they
don’t survive for long.
This was true for all living creatures.
It’s also true for people running businesses or
investing in the stock market.
It’s also impossible to predict irrational
behavior; people might do anything if they’re
not acting in their best interest.
Rational decision making involves
weighing costs against benefits.
we expend to gain
Satisfaction of our
wants or needs.
Even when it’s not easy to see how
benefits outweigh costs, analysis
usually reveal rationality
should we be
What are the
Should you spend more time deciding
what candidate to vote for or what car to
impact do you
have on the
Sometimes we weigh benefits to
ourselves against costs imposed on
society as a whole
This is called a negative
We usually understand these as
decisions made based on individual
What does the
What will the
motivate him to
do as the general
Sometimes the benefits aren’t as
obvious as the costs at first glance
What’s the deal
on the Red
Now you try
Now you try
You are being chased by bandits and your sword is broken.
Fortunately, you are on a horse and they are on foot.
Unfortunately your horse is tired and they will catch up soon.
Fortunately, you have a bow and as a hero, you never miss.
Unfortunately, you have only 10 arrows and there are 40 bandits.
The bad guys are strung out in a line with the fastest guys in
front. They are close enough to count your arrows.
Use cost-benefit analysis to escape!!!
We call the satisfaction of your wants
and needs utility
called the util
The Law of Diminishing Utility
We know that as we get
more units of anything,
the satisfaction we
derive from each one
(the number of utils)
Is there anything for
which utility doesn’t
Which brings us to the 7-11 from Hell
Here you can get only two things: Twinkies and