Market econ-producing and consuming based on selfinterest Markets lead to efficiency when fail government Efficient if all oppurtunities make some ppl better w.o making other worse Govt. can affect overall spending, steer econ btw recession and inflation Ch2 models Other things equal assumption, PPF 1,opportunity cost decision based How much less of one good can be prod if more of other good is prod Efficiency- if produces on PPF and efficient in allocation give ppl wants Two basic sources of growth- increase in factors of production, resources Such as land, labor, capital, and human capital, inputs not used by prod And improved technology Model 2 Comparative Advantage and Gains from Trade (Trade between 2 individuals or 2 countries is mutually beneficial); Absolute advantage Each individual (country) specializes according to absolute or comparative advantage and then engage in trade to increase his/her/its economic welfare. Two countries have opportunity to trade with each other, two countries through trade can both gain mutually beneficial AA(Absolute Advantage)-each individual or country has an advantage can produce at a (lower labor cost ) Ca- lower opportunity cost,source gain from trade Model 3 Circular Flow Diagram (showing interactions between households –factors market-firms-goods market Positive (What is - descriptive/factual) vs Normative (What should be - prescriptive/opinions/value judgments) economics Disagreement because of simplifications to make in a model, or about values Ch3 supply demand competitive market no buyer and seller influence : Law of Demand: Factors behind a D-curve (normal vs inferior goods; substitutes and complementary goods)
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This note was uploaded on 03/24/2011 for the course ECONOMICS 200 taught by Professor Clare during the Spring '08 term at Rutgers.