Tips in creating a proposal
1. You have to know what you want. Do you want more or less of something. The something can be directly related to your topic or it can be associated with your
topic.
Example: We want to increase the amount of affordable life saving drugs so that those who need them can get them.
We want to reduce the amount of violence so that the use of the death penalty is reduced.
2. Don’t be afraid of redefining the problem.
3. Think Crazy!!! Or Think like a baby.
Don’t let preconceived notions, laws, economics our any other barriers create a dam that will restrict your stream of thought.
Don’t be insane (Einstein’s insanity) doing the same thing over again but expecting a different result.
After you have come up with a new idea then work you can walk it back to make it legal, cost effective, and appealing.
4.
Don’t be afraid of using market-based solutions. Government is not the answer to everything, can you change incentives without making a law. If the answer
no, then how big is the problem.
5.
Is your issue a market failure- examples are imperfect competition, free riding/public goods, imperfect information, externalities. If the answer is yes than
you should investigate how these externalities are handles in other topics.
6.
You must change incentives- don’t forget about feedback loops, the impartial spectator, and proper vs improper.
7.
Create situations that will shift supply and/or demand
8.
Must be Constitutional. If you haven’t already investigate the Constitutional and BOR issues that apply to your topic.
9.
Simple is genius
Supply and Demand
Shifts in Demand- besides current price changes what other factors
shift demand? (Lower to the left- Rise to the right)
When there is an increase in total demand
When there is an decrease in total demand
Price increases (direct)
Price decreases (direct)
Price (P)
Price (P)
Supply (S)
Supply (S)
P1
$5 P e
Equilibrium (Qs= Qd)
$5 P e
Equilibrium (Qs= Qd)
P1
(D)
5 Demand Shifters
Qe
Q1
(D1)
(D1)
Quantity (Q)
Q1
Qe
(D)
Quantity (Q)
1. Change in Taste (Direct)
2. Change in income- normal products- direct, inferior products- inverse
3. Change in market size (number of consumers) - direct
4. Expectations of consumers (future price, future availability, future income)
5. Price of related goods (substitutes – direct, complements- inverse)
TC
Shifts in Supply-
Supply and Demand
besides current price changes what other factors shift
supply? (lower to the left, rise to the right)
When there is an increase in total supplied
When there is an decrease in total supplied
Price decreases
Price increase
Price (P)
(S)
(S1)
Price (P)
(S1)
Supply (S)
P1
$5 P e
Equilibrium (Qs= Qd)
$5 P e
Equilibrium (Qs= Qd)
P1
(D)
Qe
Q1
Quantity (Q)
7 Supply Shifters
1. Resource Cost (wages and raw materials)- inverse
2. Alternative output price change - inverse
3. Technological improvements
4. Number of Suppliers - direct
5. Producer expectations about future- inverse
6. Subsidies – government gives money to produce - direct
(D)
Q1
Qe
Quantity (Q)
7. Taxes on production- inverse
TC
Note: It may be confusing to think of everything in price and supply and demand
It may be more practical to think in terms of utility (satisfaction) and marginal cost and marginal benefits.
Remember
Utility maximization- Marginal Cost = Marginal Benefits
MB= MC stop
MB > MC keep going
MB < MC you went far
MB= relates to demand and MC is the supply
utility
MC
MB
Quantity