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Consumer Choice Theory

Give an overview of economic behavior in its four aspects and tell which of them is most useful to your work situation.

Economists often employ a set of graphical tools to illustrate how individuals make choices ("Theory of Consumer Choice"). Define each one: (a) individual objectives, (b) indifference curves, (c) opportunities and constraints, and (d) individual choice.

Describe what Pareto efficiency is and why economists use this criterion for comparing alternative economic systems. Use a graphic display in this essay.

Describe the difference between general and specific knowledge and how specific knowledge supports the use of decentralized decision-making.

Some states in the United States allow citizens to openly or covertly carry handguns. Citizens can protect themselves in the case of robberies or harm by using these guns. Other states do not allow citizens to carry handguns. Criminals, however, tend to have handguns in all states.

Use ECONOMIC ANALYSIS to predict the effects of handgun laws on the behavior of the typical criminal. In particular: (1) Do you think criminals will commit more or fewer robberies in the states with these laws (check on Texas, Nevada, and Georgia to begin with)? (2) How do you think the laws will affect the types of robberies criminals commit? Be sure to explain your "economic reasoning" and find some statistics to back up your findings.

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Below is an example of an argument answering the questions.

1. I believe criminals will commit fewer robberies in states with laws that allow citizens to carry handguns. The benefits to citizens in being able to better protect themselves have an economic component, which is impacted by health and the ability of an individual to potentially support his or her family. The potential disadvantage to criminals is the increased costs associated with risk of armed robbery, when a robber does not know whether a citizen or shop keeper may have and use a handgun to stop an attempted robbery. The robber who is stopped in the process of committing a crime pays additional court costs and may spend more time in jail, which may have a negative economic effect on his or her family. Between 1886 and 2001 in Texas over 5,000 crimes were committed by citizens who were registered hand gun carriers (Legal Community Against Violence, 2008). The statistics imply that those carrying hand guns are likely to commit more crimes and therefore, to have a more negative economic impact on society. However, as LCAV (2008) points out, many of those seeking permits to carry hand guns are already criminals. The issue is then not whether laws that allow citizens to carry guns have a negative impact on society but whether they necessarily will. If, for example, laws were stricter in who is eligible to register to carry hand guns, the negative impact may not exist.

In support of the concealed carry laws in Nevada the research of John Lott is cited (Robison, 2010). Research conducted by Lott suggests that when law abiding citizens are allowed to carry concealed weapons they are able to defend themselves and others. This means ...

Solution Summary

The solution discusses the consumer choice theory.