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ECON1120(2) - LECTURE#2 08/29/MON Guns vs butter...

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LECTURE#2 08/29/MON Guns vs. butter Growth=Moves outward (use more resource OR get better technology-to make more stuff with same input) -how many guns we have to give up in order to get butter Trade op doesn’t look the same depending in where we start from Opportunity cost is what we have to give up in order to get what we want If we had two economies with very different resource endowments Ex) wisconsins with lot of cows Compared with state without cows(Utah with big gun factories) --graph will look very different -there is no such thing as pure free market economy or command economy(gvmt decides everything) -it is a mixed thing even in the most extreme places like soviet union -US; free market economy but we have govmnt running things( virtually run telephone/water companies/naval army..etc) -some method of enforcement that government has to run -most countries are in somewhere between -soviet union and other communist countries has more equality in income, but lower level of income Matter of choice of what countries do; they can change over time -US have privatized lot of things 1.Private sector Different types of firms(basic productive unit) A. Proprietorship (one person producing and selling something) -give service, contract, receive money, does it as individual) -predominant mode of production -most of the businesses were proprietorship B. Partnership Ex) lawyers; usually engage in partnership/, doctors C. corporation -very big advance, invention; lot of different people can own it but liability is limited to amount of money they put in the first place; takes the risks that partners or proprietors never do -corporations can take business risks that individuals cannot do. -allowed massive accumulation of wealth that drive modern economy D. Parasi -Producing unit that is owned at least 51% by government -act like private corporation -ex) state oil company -owned by state(state owns oil), Ex) --How Producing units are organized in market T.7 Characteristics of Different Market Organization 1)-bottom: monopoly-there’s only one proprietor(set whatever price, no free entry because there’s only one of them) 2)-other end: firms all producing same thing(no one have any effect on price, enter market freely, compete through price ex) wheat farmers; thousands of them/ ; anybody can go into the market and compete 3)-monopolistic competition; strong effort to differentiate products(to get wealthyyy) -price and quality competition; getting you to buy their stuff instead of others 4) only a few producers as opposed to many Ex) cigarette companies; have to pay attention to what others are doing
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PUBLIC SECTOR Government Figure: TOTAL Tax revenue -gvt relative to total economy -different shares in OECD(lot of most industrial capitalist countries) -US in highest 20 -denmark & Sweden; tax half of income(?) LECTURE# 3, 4 8/31/WED Circular flow of income Household - consuming unit + own stuff the economy use to make things with (ex. Land, labor, capital..) Firms - producing unit (provide services and make stuff) - Markets are in the input side and output
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