ECN 104 Lecture Notes - Lecture 3: Externality, Avoidance Speech, Overproduction
Document Summary
Production possibility frontier: scarcity, presence of unattainable combinations, choice. Economic systems: classified by the dominant type of institutional arrangements used for coordinating economic activities, 3 types, market driven, central planned, mixed. Characteristics of the market system: private property, encourage investment, innovation. Owners will maintain or improve their property so as to preserve or increase its value: facilitate exchange. The title to a property assures the buyer that the seller is the legitimate owner: promote economic growth. People will use their time and resources to produce more goods and service: freedom of enterprise and choice. Freedom of enterprise: businesses can buy and sell as they choose. Freedom of choice: owners can use or sell property as they chose: self-interest. Easy entry and exit it: markets and prices. Prices signal scarcity and guide resource allocation: technology and capital goods. Monetary rewards for new products or techniques accrue directly to the innovator: specialization. Self-sufficiency breeds inefficiency: division of labour.
