EcoN BASICS 

::  THE PARADOX OF VALUE ::

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Understanding why the paradox exists can be helped by understanding the economic terms known as marginal utility and scarcity ..

1 of 4: The paradox of value ​

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,2 of 4: tragedy of the commons, marginal analysis & 'laffer curve'

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3 of 4: oligopolies, game theory, dominant strategy, and Nash equilibrium
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4 of 4 : Game Theory and Oligopoly:

Scarcity :: can be simply defined as how readily available a good, skill, or service is. Is there a lot of it compared to what people are demanding?

Marginal utility :: is the additional satisfaction or gain someone gets from using or purchasing an additional unit of a particular good or service. People are willing to pay a higher price for goods with greater marginal utility.

​Utility ::  is the economist's way of measuring pleasure or happiness and how it relates to the decisions that people make. Utility measures the benefits (or drawbacks) from consuming a good or service or from working. Although utility is not directly measurable, it can be inferred from the decisions that people make.

 :: Calculating Marginal Utility ::

Suppose you have the following utility function: U(b, h) = 3b * 7h

              :: where ::
b = number of baseball cards
h = number of hockey cards

And you're asked "Suppose you have 3 baseball cards and 2 hockey cards. What is the marginal utility of adding a 3rd hockey card?"

First step is to calculate the marginal utility of each scenario:

U(b, h) = 3b * 7h
U(3, 2) = 3*3 * 7*2 = 126
U(3, 3) = 3*3 * 7*3 = 189

The marginal utility is simply the difference between the two:
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U(3,3) - U(3, 2) = 189 - 126
                         = 63.



Price leadership is more widespread than cartels, because it allows the members complete freedom regarding their product and selling activities and thus is more acceptable to the followers than a complete cartel, which requires the surrendering of all freedom of action to the central agency.

If the product is homogeneous and the firms are highly concentrated in a location the price will be identical.

​However, if the product is differentiated prices will differ, but the direction of their change will be the same, while the same price differentials will broadly be kept.