Scarcity and Choice - how much? o Free Market Economy--...

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Econ 4.3 Monday, January 18, 1999 Announcements: Complete #1, 3, 5 from Chapter 2. The problem set is due on Friday 1/22. . Lecture notes: Chapter 1 (cont'd) Positive economics is an approach to economics that seeks to understand behavior and the operation of systems without making judgements. It describes what exists and how it works. It is a description of something that can be agreed upon. Normative Economics is an approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. Forecast -- inflation, employment, foreign exchange Chapter 2: Scarcity and Choice The Three Basic Questions For All Economies (all societies must answer three basic questions) 1. What mix of products should be produced (goods and services) and
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Unformatted text preview: how much? o Free Market Economy-- absence of market plan o Consumer Sovereignty-- the idea that consumers ultimately dictate what will be produced (or not produced) by choosing what to purchase (and what not to purchase) 2. How will it be produced? o Technological issue 3. Distribution -- who gets the product that is produced? Free Market deteremined by individuals selling scarce resources they own and with the income they can buy the products Because people won't voluntarily give money the government steps in and taxes Production Possibilities Frontier-- illustrates the principles of constrained choice, opportunity cost and scarcity. It shows what is possible and what isn't...
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This note was uploaded on 02/21/2008 for the course ECON 4.3 taught by Professor Fox during the Spring '99 term at Pennsylvania State University, University Park.

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Scarcity and Choice - how much? o Free Market Economy--...

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