Chapter 3 Macro - Chapter 3 Markets Demand and Supply and...

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Chapter 3 Markets, Demand and Supply, and the Price System Markets and Exchange- - Allocation Systems determine who gets goods and services and who does not. - A market is a place or service that enables buyers and sellers to exchange goods and services. - Barter is the exchange of goods and services directly, without the involvement of money. - Monetary exchanges involve exchanging money for goods and services. Allocation Systems- - Who gets the goods and services? - Government determined - First come first served - Lottery System—random - The Market System—income earners buy goods and services Which System Works? - Fairness --none of the systems are fair, scarcity means someone gets left out.
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- Incentives increase supplies and raise standards of living in a market system. Production Possibilities Curve Markets- - Markets enable the exchange of goods and services. Barter—considerations- - Barter requires a double coincidence of wants —each party to the exchange must want what the other has to trade.
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Transactions costs —the costs of making an exchange—are high in barter exchanges. Money reduces the transactions costs because it does not require a double coincidence of wants.
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