Lecture 1: Introduction to Economics

Question 1

Coordination problem

Answer 1

a situation where all people could be better off if they decide to act together rather than separately

Question 2

Coordination failure

Answer 2

when the non cooperative action of people results in an outcome that is worse for at least one and not better for any

Question 3

Why does a coordination failure occur

Answer 3

when the coordination problem is not addressed by the appropriate institutions

Question 4

What are the two consequences of coordination failure

Answer 4

1. overuse of resources
2. underuse of resources

Question 5

Tragedy of the commons

Answer 5

a coordination problem were individuals act for themselves and lower the payoffs for all

Question 6

External effects

Answer 6

when a players actions confer a benefit or impose cost on other player, neither of these are accounted for by the player taking action

Question 7

Two ways to address coordination problems

Answer 7

1. internalise external effects
2. change institutions

Question 8

Institutions

Answer 8

the laws, informal rules and conventions regulating social interactions

Question 9

Six components of a game

Answer 9

1. players
2. strategy sets
3. strategy profile
4. order of play
5. information
6. payoffs

Question 10

What is a strategy set in a game

Answer 10

set of actions available to each player

Question 11

What is a strategy profile in a game

Answer 11

the strategies selected by each of the players

Question 12

What is the order of play in a game

Answer 12

the order players play, is it simultaneous or sequential

Question 13

What is the information in a game

Answer 13

what players know