[book, 2007] 'The Undercover Economist', after reading this.

This book in a word?:
This book taught me basic economic mechanisms. It gave me insights and fun!

============================
Publishing year: 2007.
Year that I Read : 2009. 1.

Fact: Involving with more guarantees better prosperity.

Feeling: Ah~ I feel cool since I come to know the principles.

Finding: More transparent information usually brings better prosperity.
============================


- Power of Scarcity

I think most people already know this lesson. There are several examples of this.
Ex1) Good pasture, orchards are expensive, but only useful when other lands are not available.
Ex2) Starbucks located near subway station pay expensive rent fee, but run lucrative business.
Ex3) Since its S/W are dominant, Microsoft can set high prices.


- Usefulness of Price Differentiation

I newly learn this insight through this book. Now I can understand why my ex-boss set our S/W prices differently according to its versions. There are some examples of this.
Ex1) Starbucks, sell coffe with various sizes, options with different prices.
Ex2) Many supermarkets display goods witj different price tags. So buyers might look them more attractive as a whole. Cheap products look attractive due to its low price while expensive products look attractive since these have better functions.


- The Reason Why Economist Raise "ideal world' to Explain Economic Principle Although Such a World Doesn't Exist.

Because this way of thinking enables person better understands what is not functioning correctly in the "real world".


- 'Up-front Fee' VS 'Pay per Drink'.

I came to understand this newly thanks to this book. What it means is that if people pay up-front fee and have a right of free drink, people will consume much. While if people need to pay per drink, people will less likely drink. Changing from 'up-front fee' to 'pay per drink', school authority can solve too much drinking issue. This lesson can be applied to government's transportation policy too. 'Expensive fee for free drive' VS 'Cheap fee as a pay per drive'.


- Power of Auction.

When EPA (Environmental Protection Agency) in the US tried to reduce the emission of sulfur dioxide which is the source of acid rain, firstly it was challenged by companies. Companies estimated the cost to reduce the emission is huge. But when the EPA applied an auction to permit of emission right, the actual cost resulting from the auction between companies was much cheaper. How brilliant!


- How to Prosper?

Involving with more guarantees better prosperity. More transparent information usually brings better prosperity. So free trade in that sense increases total wealth.