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Finance & Accounting
Pages 4 (1004 words)
Microeconomics Name Institution Question 1 Parable Parables in economics are often created to understand the effect and subsequent effects resulting from the same effect. Frederic Bastait, once a French economist, introduced the parable concept where he used the parable of the broken window fallacy in explaining the why destructions do no benefit economies.
While buying the television, the seller will have spent on something else thereby boosting the local economy. Therefore, in the perspective of the observer of these events, the ill behavior of the man’s son or breaking of the television set has stimulated the economy; however, according to Bastiat, the entire understanding exposes a fallacy. Looking at the concept brewed in this case, breaking of the television reduces the man’s disposable income that he may not be able to purchase; for instance, a new shirt or commit to other luxuries. Nonetheless, the breakage of the television is helpful to others; for example, the seller or the person repairing the television. It should be noted that despite the breakage of the television set being helpful to others; it robs industries and reduces the spending on other goods and or services. Replacing an item that was already bought is regarded as the maintenance cost as opposed to buying new items or items that the owner has never had (Rockwell and Ludwig Von Mises Institute, 2008). ...
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