S_DCLASS - 1 1 Demand Supply and the Meaning of(Economic...

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Unformatted text preview: 1 1 Demand, Supply and the Meaning of (Economic) Life ¡ What did Adam Smith Know? ¡ It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. ¡ Self-interest, competition, markets, S&D, Micro ¡ Friedman’s pencil 2 In the News 3 Adam Smith's “Invisible Hand”? ¢ Self-interest and competition in market system leads to ‘optimal’ outcome ¡ Why not abuse by business? ¡ Why do consumers ‘get what they want”? ¡ Why produce efficiently? ¡ Why work hard? ¢ Efficiency versus Equity ¡ Market economies - Capitalist ¡ Non-market economies – Som, Communism ¢ Central planning – information and incentive problems ¢ Role of Gov’t? – Laisser faire ¡ But : market failure, externalities, public goods 2 4 What Determines the Price of Anything? The Value? Anything?...
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S_DCLASS - 1 1 Demand Supply and the Meaning of(Economic...

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