lecture 10 - LECTURE 10: MAGIC OF THE MARKET - coordinating...

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LECTURE 10 1 LECTURE 10: MAGIC OF THE MARKET - coordinating role of prices. - better technology - lower costs get passed to consumer. SLOPE OF DEMAND AND SUPPLY CURVES. INTERFERING WITH THE MARKET MECHANISM - price ceiling. Mankiw: Chapter 4 and 6
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LECTURE 10 2 MAGIC 1: PRICES COORDINATE ACTIVITIES Poor weather reduced grain crop - need to get people to consume less. - need to coordinate people’s buying with lower quantity available. EITHER : advertize problems and ask for voluntary restraint - will people act - why should they? OR: raise price - people want less - immediate response. In fact, price rises on its own - without anybody telling anybody to do it. - “the magic of the market.” Point #6: market with many buyers and sellers are a good way to organize economic activity.
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LECTURE 10 3 Pencil
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LECTURE 10 4
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LECTURE 10 5 .......................
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LECTURE 10 6
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LECTURE 10 7
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LECTURE 10 8
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LECTURE 10 9
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LECTURE 10 10
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LECTURE 10 11
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LECTURE 10 12 “Not a single person knows how to make me!” The woodcutter in Oregon - does not know how to manufacture the graphite. - does not know how to manufacture “plug” at top.
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This note was uploaded on 10/29/2011 for the course ECON 2010 taught by Professor Mertens,wi during the Spring '07 term at Colorado.

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lecture 10 - LECTURE 10: MAGIC OF THE MARKET - coordinating...

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