assign2 - Intro Macro N Sheflin Assignment 2 NOTES Review...

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Intro Macro N. Sheflin Assignment 2 NOTES : Review of basic microeconomics, specifically Demand, Supply and the Meaning of (Economic) Life. If you haven’t had micro, don’t worry, all you really need to know for this course (Macro) is how to play with the simplest supply and demand curves. We cover some other basic economic concepts that every living being should know. Much of what is covered that is of interest for Macro, we will do more carefully throughout the semester. You should be comfortable with simple ‘sketched’ graphs; if not, ask lots of questions in lecture and on discussion boards. KEY POINTS : Importance of the concept of the invisible hand – basis for belief in ‘free-market’ capitalism in which individual self-interest (greed), coming together in a competitive market place, leads to an socially efficient outcome as though ‘guided by the invisible hand of providence’ o Note – this indicates that market economies are efficient but not necessarily equitable (fair) Measuring and determining the value of anything – by its market price determined by supply (reflecting costs and scarcity) and demand (reflecting tastes). Capitalism versus Socialism – individual and market determined outcomes versus government planning. Supply and Demand - Micro o Changes in quantity demanded (which is a movement along a given demand curve) versus change in demand (which is a shift in the whole curve. Demand refers to the whole relation between price and the quantities people would be willing and able to buy – the whole curve. A change in demand means the whole curve shifts, due to a
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