ECN_203_3_Introduction_to_Markets(f09)

ECN_203_3_Introduction_to_Markets(f09) - Ch. 3 Introduction...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Ch. 3 – Introduction to Markets Market -- an arrangement wherein buyers and sellers voluntarily exchange goods and services. Why do markets exist? How are goods and services exchanged in markets? How do markets work?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Why do markets exist? Specialization -- each worker focuses on the production of a single good. Creates surpluses to be exchanged (traded) in markets. Gains from trade -- the increased utility made possible by specialization and trade.
Background image of page 2
Gains from Trade Absolute advantage -- the ability to produce more of a good than those one trades with using the same amount of resources. Comparative advantage -- the ability to produce a good at a lower opportunity cost than those one trades with. In either case, trade is beneficial.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
How are goods exchanged in markets? Barter -- exchange of goods and services for other goods and services of similar value. Barter system flawed-- there’s a better method to trade. General equivalent -- one commodity, such as money, that is generally accepted for all other commodities.
Background image of page 4
3 Roles of Money Medium of Exchange
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 19

ECN_203_3_Introduction_to_Markets(f09) - Ch. 3 Introduction...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online