Some Tools of the Economist-Ch#2

Some Tools of the Economist-Ch#2 - What shall I give up?...

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Unformatted text preview: What shall I give up? Opportunity Cost Subjective: priced according to the decision maker and the current circumstance Measured by time or by objects sacrificed Helps make decsisions T rade Creates Value 1) When individuals engage in a voluntary exchange, both parties are made better off. Exchanges take place because both parties believe they will benefit 2) By channeling goods and resouces to those who value them most, trade creates value and increases the wealth created by a societys resources When goods are moved to individuals who value them more, the total value created by a societys limited resource is increased. Materials things are only wealth when they are in the hands of value them. T ransaction Costs-A Bar rier to T rade T ransaction Cost: The costs of the time, effort, and other resources necessary to search out, negotiate, and complete an exchange. I nformation is costly The M iddleman as a Cost Reducer M iddleman: A person who buys and sells goods or services or arranges trades. A middleman reduces transaction costs. The Importance of Propery Rights Private Ownership provides people with a strong incentive to take care of things and develop resources in ways that are highly valued by others. Property Rights The rights to use, control, and obtain benefits from a good or (service)? Private-Property Rights 1) The rights to exclusive use of the property (owner has sole possesion control, and use of the property-including the r ights to exclude others); 2) Legal protection against invasion from other individuals who would seek to use or abuse the property without the owners permission 3) The right to transfer, sell, exchange, or mortgage the property Private owners can do anything with their property as long as it does not infringe anyone eless r ights...
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Some Tools of the Economist-Ch#2 - What shall I give up?...

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