Friday, May 13, 2005
No. You really shouldn’t have.
People will buy things if they value them at or above their price. They will not to buy them if they value it at less than the price. Subject to their budget constraint, people will choose a bundle of goods that makes them happiest.
If you buy someone a present that they could already afford, then you are creating an inefficient outcome. If the person had wanted the item, then they would have bought it. They may value a ten pound gift at five pounds. They will still like it, but they will like it less than the amount it cost. Resources are wasted.
The only acceptable gift-giving situations are:
a) To someone who is poorer than you – they would like the item, and value it at market rates, but could not afford it.
b) Buying something that the recipient likes but has not heard about so has not bought already. You might get lucky, but it’s a risk.
c) Giving someone money so that their budget constraint shifts to the right and they can buy more of what they choose. This, of course, will be determined by their new tangential indifference curve.
Otherwise the market will be distorted, resources squandered, and the children will suffer.
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People will buy things if they value them at or above their price. They will not to buy them if they value it at less than the price. Subject to their budget constraint, people will choose a bundle of goods that makes them happiest.
If you buy someone a present that they could already afford, then you are creating an inefficient outcome. If the person had wanted the item, then they would have bought it. They may value a ten pound gift at five pounds. They will still like it, but they will like it less than the amount it cost. Resources are wasted.
The only acceptable gift-giving situations are:
a) To someone who is poorer than you – they would like the item, and value it at market rates, but could not afford it.
b) Buying something that the recipient likes but has not heard about so has not bought already. You might get lucky, but it’s a risk.
c) Giving someone money so that their budget constraint shifts to the right and they can buy more of what they choose. This, of course, will be determined by their new tangential indifference curve.
Otherwise the market will be distorted, resources squandered, and the children will suffer.
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