Wheelan stresses that a successful economy depends on the many different needs and desires of the citizens. The different passions and interests people have make the world and economy thrive. “Individuals seek to maximize their own utility,” and individuals maximize their utility in different ways based on their personal preferences. I also learned the expense of rarity. Availability is everything in economics. It has a lot of control over the market and the prices the public will pay for goods. For example, about a year ago the first frozen tart yogurt store, Lutz, opened in South Florida and it was an instant hit. It was the only yogurt place in the South Florida area which caused people to travel from both near and far to get the delicious treat. Many yogurt stores began to open as a result of the original store’s success. This led to a decrease in the price of frozen yogurt, more options of yogurt flavors, and shorter lines in the stores. The demand for yogurt was so great that it created an overwhelming supply with many more options to satisfy everybody’s personal preferences. In Chapter One we learn the advantage of advantage; how having a product with a slight edge can make all the difference in your profits. A classic example of this is the iPhone. Apple added the feature of an iPod to a cell phone which made life more convenient for all cell phone and iPod users. The iPhone is one of the most common phones today because of the added advantage Apple gave to the typical cellphone making it a hit on the market very quickly. Creating incentives as well as punishments help accomplish win-win situations that will satisfy all parties. In Chapter Two the author mentions the concept of giving customers free meals if they do not receive a receipt. It gives the employees an incentive to follow the rules and do as they are told. A similar example of this concept is when truck drivers are forced to drive their cars with a bumper sticker that asks how their driving is and also has a number you can call to report the driver if he/she is not driving safely. These type of business practices help ensure that the employees act appropriately so the customers get the treatment they deserve without the management in the company having to constantly watch every employee’s actions.
Likewise, companies put rewards in place for their customers. For example, car insurance companies like Allstate pay their consumers for driving safely and following the laws for extended periods of time. It seems odd to reward what is expected but Allstate gives themselves much more of an edge because no other car insurance company currently pays their customers to simply follow the rules. The book has repeatedly mentioned the value of taking risks in hopes of seeking greater rewards and I think this is a prime example of that. Allstate is clearly losing money through paying its customers, but they must feel that this “promotion” will help them achieve their ultimate goal of having more customers thus making them a larger profit and making up for their lost money.
When one’s family, friends, or possessions are on the line one will do all it takes to ensure his loved ones or objects are getting the best treatment possible. Investing your own money or most cherished objects forces you to work harder hence the reason some CEO’s own shares in their company. An example of this in the political world is when government officers, such as governors and senators, place their children in the public school system. Placing their own children in the system gives them an added incentive to work hard to make sure our countries education is the best it can be.
Chapter 3 points out the unappreciated aspects of our government; the reasons we are able to conduct out lives in an efficient manner simply by trusting formal government organizations. These government organizations are our eyes and ears ensuring employees are following protocol and conducting...
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