Common Sense Economics Section 3 Element 2 Allocation Through Voting is Fundamentally Different Then Market Allocation 1

Let’s Play a Game… On your sheet you will see two carts of goods, each with a price tag next to it. 1. Go through each item in both carts and ask yourself how happy or unhappy you would be to have that good at that price on a scale of 10 (very happy) to -10 (very unhappy). 2

Let’s Play a Game… 1.After establishing a value for each item in each cart, add up the totals for each cart with positive numbers adding to the total and negative numbers subtracting from it. 2.You will now vote as a class to decide which cart everyone will get. Cast your vote by circling whichever cart you want to win the election. 3

Let’s Play a Game… 3.Now, with a budget of $75, go shopping through both carts and choose only those items you wish to buy. Keep track of both the value and price of each item and come up with a total combined value and cost of all the items you chose. 4.Answer question 4 on your own. 4

Making Decisions Using the Democratic Political Process When voting for a politician (or politicians) to make choices for us we face a limited set of options, each of which may include things that we both like and dislike. … And regardless of the option we choose, we get (and have to pay for) what the majority chooses. 5

Making Decisions in the Market Place When making a decision in the market place you get to choose only those items that you are willing to pay for and choose to not get those items that you are not willing to pay for …The items that you get and the amount you pay are completely up to you. 6

So which method of choice is most economically efficient? 1.Who received a higher total value from the market method of choice (your total value in question 3) as compared to the political one (the value from the cart that won the election) 7

So which method of choice is most economically efficient? 2. For those who received a higher value from the market method of choice, how many of you spent less money through this method to obtain that higher value? 8

So which method of choice is most economically efficient? The market method of choice appears to be the most economically efficient in that gives us the greatest value at a lower cost. …Is this an unusual result? 9

Not Really! Class # of students Preferred Cart Total Election Result Total Market Total Gov. Spend. Market Spend. Econ S11931, ,542$6,975$3,923 Econ S113314,7534,18016,472$24,825$16,756 Econ S112613,4672,65011,899$19,575$10,872 Econ F111331,6321,1497,166.5$9,975$6,193 Econ S122716,4345,91414,220$20,325$12,935 Econ S122906,1655,75514,493$21,750$13,292 Econ S121061,5541,2215,416$7,950$4,666 10

The Four Ways We Spend Money 11