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Lecture 3

ECON 1000 Lecture 3: Week 2

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Department
Economics
Course
ECON 1000
Professor
Nick Rowe
Semester
Fall

Description
ECON 1000- Lecture 3 – Week 2  PASS: Wed @ 10-1130am (PA 240) or5:30-7pm (PA 101)  Principle5: Trademakes everyone betteroff; o Specializationandinterdependencemakeseveryone better off. o Everyoneconsumesa varietyofgoods whileat the sametime we producespecificgoodsthatare specificto our skills o The globaleconomyandothereconomiesare interdependent; we needeveryone else’sskillsand producetobe sufficient. o We specializeisbecause everyoneis differentand possess differentskillsets  Thisis calleda comparativeaheadadvantage o Economiesofscale are a term thatdescribesthatdependingon what we producethe same goodswill be cheaperto buy. Principle#6 o Markets produce,buyand sellon theirown willaccordingto a country’sor economy’s skills. o If youwant to consumesomethingthat’saccessiblefrom the market thenmake sure it’s onthe market. o Economiesthatcan producetheirown markets are goingto succeed overothers. o Coordinationmechanism: Marketsseeminglycoordinatetheir relationsontheirown duesupplyanddemandinmarkets. o Raisein prices can meanthatsocietyis consumingtoomuch whileproducingtoolittle,thusthisprice raise gives incentiveto producemore to make it cheaper. o Pricinggives signalsandincentivestoeconomiesto act and follow.  Principle# 7: Govt can sometimes improve market outcomes o Sometimesmarkets don’tdovery well o Youcan’t havea market unlessyouhavepropertyrights. o The Gov’tsets equalrules(definement,andenforcementof propertyrights)to ensurethatdisputesaresettledfairlyand makes sure conductis appropriateforthe market. o Th
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