Interaction1-2

Interaction1-2 - Interaction: How Economies work Chapter...

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Interaction: How Economies work Chapter 1-2
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Interaction of choices—my choices affect your choices, and vice versa— is a feature of most economic situations. In economics we will quickly see that end results sometimes comes out different from what was intended.
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Principles that underlie the interaction of individual choices: 1. There are gains from trade. 2. Markets move toward equilibrium. 3. Resources should be used as efficiently as possible to achieve society’s goals. 4. Markets usually lead to efficiency. 5. When markets don’t achieve efficiency, government intervention can improve society’s welfare.
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There are gains from trade In a market economy, individuals engage in trade : They provide goods and services to others and receive goods and services in return . There are gains from trade : people can get more of what they want through trade than they could if they tried to be self-sufficient.
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specialization : Each person specializes in the task that he or she is good at performing. Follow your bliss!
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Interaction1-2 - Interaction: How Economies work Chapter...

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