u wlL pattuL Wh arent Command Economies Successful Government control over

U wll pattul wh arent command economies successful

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-u-wl.L pattu>L!. . Wh aren't Command Economies Successful? Government control over production means producers, so they have no incentive to be,, lri.n,ova.tiv<J- or -t-0 )'V'-i 14 l\M tR. ~t5 . Production is therefore ~t effJereMtt Without technological innovations eJ.OM ltMe? (fo.._/Wt ~yow. Wfn/11 t:1ho{ hft -o ft. ttjl w- \ ; m ~r~t) aJ1d )ov~-? 5't~~ t 1• ~ t · I \J-ll , ) ~ c-t c f+ ( i r. t. t Y'YI a. y ~ ei . rYl o~ u-ecrtl v0 of I . " t ' . \ 1 i lo, 1 ~ 3
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Chapter 1: First Principles To explain how an economy works we must first analyze how individuals make the decisions that shape our economy. What to buy? 7 f"t..._ • Go to school or get a job? What to produce and sell? Principles of Individual Choice 1. Resources are scarce Resource = ~'fJ~ j ~ at" be t4Sec1. -&o p~ so~ -t4i,,-':j eJ>e- . oLabour = l;wr~ r;/,cM...- h~ ~Mo.116 oLand = no.turM. vec.o~~ (So\ L, 01 l , """11 er&tl t, , 1tva.m) oCapital = 5l7l?c:U. -tita -t ha.ve bw-.. p~d-ucteeJ ,·h. ordvr to be uSet) -to prv~ otw Bvocls L ht,(, 1 ~~.,, -uvLs) oHuman capital = -eclu.caiicrn 1 <;j.qUs, C\AJ ~ ~ oTime , ., 4
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Scarcity = re..~utArct..S a~ ScarlQ.. ~ -tlvvre r~ not. eMV-:Jh -co c;a,-tl sf~ ew, ; ~o~ if ii ~ r . Consumers are limited by /11.CAJ~ Economics is t~ ~-W~ of tfuz Gt If occ..-t{ul'\ of 5ca.rGe. re5 0 1At CJl-S · Are the foil owing goods scarce? a) sunshine? /Vo . b) money?l e5 · 1vw 11 ~ i~ JWt ~~~- ~ · ~ c) steel? Ye$ d) mosquitos? ;Vo . ;j l 1 1 ~;j ) fA.~T) [ c,,lwicg,) Scarcity means we face tro. tl ef>..ff and what we tradeoff is a f>Jk . 2. Opportunity cost is the Real cost= Thk Ui3~t or beJt f1ro.3-vne- o~~t:J ves""ltj fvm ex. [email protected] . The real cost of something is lJ.p:t ~ov- MM${ jM- wp -b> 1~ It. Example 1: A new phone is on sale for $195 The nominal cost is $195 The real cost is the other purchases that could be made with the $195. Exam pies: food or books or if ft• you have to earn the $195 you must give up --v ~ t~ LW Y f . 5
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Example 2: Going to FIC fl . c' "";I Opportunity costs: ~ Mofl~-fa~ Co>tS C bvo~5 o.nJ -+um\~) (1~ c..o>ts Cl~-t In.~) *E g I ) .L.~ , ( ~ ) _L /~-t lhcow..e (cttμ>,oJVI ;; .$_>b,voO ~l7{J~) ( j I IJf)O + 1~-fr6~ {' 1) I ol!O \ f / 3. People make decisions at the margin Marginal means incremental or one at a time. Example 1: When grocery shopping people think "should I buy one more item or not?" Hbw Mil~? o Not "should I buy groceries at all or not?" ::: C. People decide i• How ) " o..- ''A~ ~ '' tvt.(fr'f, D~ t/<eMt CAtU or nErtirJ'J · Example 2: "How many times should I brush my teeth each day?" o Not "Should I brush three times per day or not at all?" Because resources are scarce we must make tradeoffs by making marginal decisions about how we allocate our resources.
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