ECO 02 - 15 SEP - Lecture 02 ECO 100Y5Y 15 September 2008...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 02 15 September 2008 ECO 100Y5Y A. Cohen 1 E C O N O M I C S PARKIN BADE Lecture 02 15 September 2008 Market Solution to Economic Problem Market Society how does system of “free” individuals, each pursuing own self-interest, solve economic problem rather than degenerating into chaos? self-interest plus competition solution to economic problem continued Adam Smith, The Wealth of Nations (1776) “[An individual, by directing his industry] in such a manner that its produce may be of the greatest value, he intends only his own gain, and he is in this . .. led by an invisible hand to promote an end which was no part of his intention. . .. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”
Background image of page 1

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

View Full DocumentRight Arrow Icon
Lecture 02 15 September 2008 ECO 100Y5Y A. Cohen 2 Market Solution to Economic Problem Market as a new form of social control; pinnacle of individual freedom, yet strictest of economic taskmasters. consequences of interdependence free will and determinism dependence on market circular flow of economic life Textbook p. 47 Wages, rent, interest, profits Labour, land, capital, entrepreneurship Expenditures services services Figure 2.8 Circular Flows in the Market Economy . Goods markets Households Factor markets Firms Self-Interest and Social Interest Markets can provide incentives and succeed in aligning self-interest with social interest. Markets can also fail, creating conflicts between self-interest and social interest. Economics provides a way of thinking to
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/25/2010 for the course ECONOMICS ECO100Y taught by Professor Furlong during the Fall '09 term at University of Toronto.

Page1 / 11

ECO 02 - 15 SEP - Lecture 02 ECO 100Y5Y 15 September 2008...

This preview shows document pages 1 - 3. Sign up to view the full document.

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