Broken Window Summary

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TUI UNIVERSITY ANDRE T. MCCASKILL MODULE 1 CASE: Market Behavior Read Chapter II “The Broken Window” and Chapter III “The Blessing of Destruction” Please address the following questions in a 3-4 page paper: 1. Use your own words to summarize the main idea of the broken window fallacy. 2. Choose three of the economic terms described and defined in the PowerPoint Presentation (starting on slide 18) that you believe have particular application to the chapters. What are they? Describe how each term relates to the chapter. 3. Which one of the five “big ideas” referred to in the presentation is represented by the broken window fallacy? Explain. 4. Give a current example of Henry Hazlitt’s ideas. What lessons can be learned? BUS 305: Competitive Analysis and Bus. Cycles DR. William Muraco -PD Broken Window Summary The broken window fallacy from Henry Hazlitt’s book is a simplified example of economics, given in a way that the most knowledgeable person of economics or the least knowledgeable person can understand. The fallacy uses the example of a broken window and discusses how one situation can be both positive and negative depending on the person’s involvement with the situation. The baker in the story will most likely see his window being broken as a bad thing due to the fact that he will have to come up with the $50 to repair the broken window. This money to the baker could have been already accounted for in maybe other new renovations that would expand his business. Now the baker will have to put on hold the opportunity cost of expansion and purchase the new window. The flip side to the situation is that the glass maker will now make money from this incident that would have not been there originally. As he goes on to state that this money earned by the glass maker will in turn be spent by him on the merchant of his
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