Macro 2 - Demand Supply and the meaning of Economic...

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Demand, Supply, and the meaning of Economic Life (chap 2,3) Chapter 2: The Modern Mixed Economy -Mixed economy: a combination of private enterprise working through the marketplace and government regulation, taxation, and programs. -A market is a mechanism through which buyers and sellers interact to determine prices and exchange goods, services, and assets. -Prices coordinate the decisions of producers and consumers in a market. Higher prices tend to reduce consumer purchases and encourage production. Lower prices encourage consumption and discourage production. Prices are the balance wheel of the market mechanism. The Market Mechanism How to solve the Three Economic Problems -What goods and services will be produced is determined by the dollar votes of consumers in their daily purchase decisions. -How things are produced is determined by the competition among different producers -For whom things are produced-who is consuming and how much-depends, in large part, on the supply and demand in the markets for factors of
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This note was uploaded on 02/08/2012 for the course MACROECON 103 taught by Professor Shef during the Fall '09 term at Rutgers.

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Macro 2 - Demand Supply and the meaning of Economic...

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