BSM 100 Lecture Notes - Lecture 2: Invisible Hand, Economic Equilibrium, Mixed Economy
27 Jul 2016
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Document Summary
Economy: financial and social system representing resource flow from productions distribution consumption. Economics: study of people, companies, and governments" choices in allocating soci- ety"s resources. Capitalism: free market (everything is decided by the market, the invisible hand concept; the market is able to regulate itself); produce, distributed, consumers, supply. We come to a equilibrium price based on how much people will pay and how much can be supplied for what price. i. e price (y-axis) and demand (x-axis), and where they meet, create an equilibrium price where they meet. Because the government is not intervening many suppliers go out of the market, leaving only one or two players monopoly system, leaving people at the whim of the one supplier. However, the market is not efficient for everyone, sometimes the government has to step in. Four degrees of competition: pure competition many suppliers (commodities, no distinction between suppliers).
