Editorial: Given the law of supply and demand, maximum total utility is assured only in a pure free market economy...

jing jing on April 9, 2020

Can somebody help me diagram this?

It seems that "Only" in this case is a sufficient condition. However, I thought in the lecture only always introduces a necessary condition. How does diagramming look for this question? Thank you

Replies

Shunhe on April 9, 2020

Hi @jingjingxiao11111@gmail.com,

Thanks for the question! You are correct in saying that “only” introduces a necessary condition, as it does here. The statement is that “maximum total utility is assured only in a pure free market economy,” which we can diagram as:

maximum total utility is assured —> pure free market economy

However, we don’t really need to diagram for this question. The question’s asking us for a flaw in the argument, which argues that countries with highly controlled economies aren’t acting in the way that’s most likely to bring about maximum total utility. Well, we know that other kinds of economies (like this highly controlled economy) might be able to achieve the pure free market economy, even if they don’t assure it. Upon pre-phrasing a flaw, we might realize that if the likelihood of bringing about a pure free market economy is super low (even lower than the chance of achieving total maximum total utility in a non-pure free market economy), then the country with the highly controlled economy could actually be acting in the way that is most likely to bring about maximum total utility.

Take this example to help make things more clear: say that there’s a 10% chance that a country can achieve a pure free market economy, and after that, there’s a 100% chance of maximum total utility (since it’s assured). Now let’s say that there’s a 20% chance that the country with a highly controlled economy achieves a pure free market economy. Then, we can see that the country with the highly controlled economy is acting in the way that’s most likely to bring about maximum total utility.


Hope this helps! Feel free to ask any other questions that you might have.

jing jing on April 10, 2020

Thanks. I got this question correct but my reasoning was bad compared to yours because I incorrectly thought we had to diagram it out. Your reasoning really helped me understand why the correct answer is really correct. Thank you!

Shunhe on April 13, 2020

Glad I could be of help!