Presentation 2

Presentation 2 - Introductiontomicroeconomics...

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Introduction to microeconomics Wednesday, August 26, 2009
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Review Every economy faced with: Scarcity Choice  Opportunity cost incentives
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Every economy must decide: What to produce How to combine scare inputs in producing outputs For whom – who gets the goods and services produced
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Tradition  Authority - Command economy  Government – Plan highly centralized Market   decentralized (often referred to as the price system) reliance on price signals – requires less information Mixed Economies Establishment of rules, regulations and standards. Infrastructure – roads, bridges etc Medicare/Medicaid programs (public finance-private provision) Education (public finance and provision) Defense expenditure (public finance-private provision) Basic research USSR – reliance on planner’s decisions but did include some  market elements
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Efficiency – An economy’s resources are used efficiently  when: “they are used in a way that has fully exploited all opportunities to  make everyone better off.” if all opportunities to make some  people better  off without  making anyone worse off  ( Pareto when the winners can compensate the losers . (But what if  compensation does not actually take place?)  Equity Distinction between equality of opportunity vs outcomes Stability-  generally assume that markets move towards  equilibrium people and firms usually exploit  opportunities to make 
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This note was uploaded on 12/07/2009 for the course ECON 211 taught by Professor Na during the Fall '08 term at Rice.

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Presentation 2 - Introductiontomicroeconomics...

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