ECON-2016EL Lecture Notes - Lecture 4: Consumption Function, Comparative Advantage, Government Spending
28 Feb 2017
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Document Summary
Two major institutions: market (private sector, state (public sector) Outlooks on market vs public sector: people request no state intervention (no public sector) only the market (private sector). Laissez-faire which loosely translates to let it be. This is the belief that you are to let the market operate freely no intervention from the state. Also, under this belief, the market will reach the optimal outcome: allow state intervention by opening up the public sector. Government takes responsibility of welfare and institutions to compliment the market. An economy under a public sector must abide by certain rules and rights of others. Increase in minimum wage may result in firms responding by raising the prices of goods or lowering demand for labour. This lower demand for labour may result in higher unemployment. Increase in minimum wage may result in more spending thus increasing the labour demanded to grow. This higher demand for labour may result in less unemployment.
