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Econ1-Fall2010-03-DemSupply-handout - Readings Economics1...

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Economics 1 rinciples of Microeconomics Principles of Microeconomics Fall 2010 Herb Newhouse 1 eadings Readings h : Supply and Demand 1 8) Ch 3: Supply and Demand (p 61 68) What, How, and for Whom? Central Planning rsus the Market versus the Market Buyers and Sellers in Markets he Demand Curve The Demand Curve The Supply Curve arket Equilibrium Market Equilibrium 2 utline Outline conomic Organization Economic Organization. Demand. t i Pi Reservation Prices. Changes in Demand. Supply. Reservation Prices. Changes in Supply. Market Equilibrium. q 3 ig Picture Big Picture Last week we showed how comparative p advantage leads to gains from exchange. But we said nothing about how those gains would be llocated allocated. Now we want to answer the following questions: 1. What goods and services should be produced? 2. How should we produce them? ho should get them? 3. Who should get them? All societal systems need to find answers to these uestions questions. 4
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Different Forms of Economic Organization entral Economies Ce t a co o es: A single (or small number of) person makes the production and consumption decisions. Could be cooperative (a small community of farmers). Could be a command economy (former Soviet Union, China, North Korea). Individually Driven Economies: h id ii d l k hi di i Each individual makes his own decisions. Big economies are actually mixed. g y 5 ey Participants Key Participants rms: Firms: Any organization that converts inputs into utputs outputs. ouseholds: Households: The consuming units of an economy. 6 Diagram of the Economy OUTPUT goods, services goods, services MARKETS spending revenue FIRMS OUSEHOLDS S HOUSEHOLDS income wage, rofit, land, profit, rent land, 7 INPUT MARKETS labor, capital labor, capital emand Demand u demand something if: You demand something if:
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Econ1-Fall2010-03-DemSupply-handout - Readings Economics1...

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