ECN 104 Lecture Notes - Lecture 4: Vise, The Incentive, Decision-Making
Document Summary
Anatomy of an economy: decision making units, households, firms, government, markets, goods and services, factors of production. Market: an institution or mechanism that brings together buyers (demand) and sellers (suppliers) of particular goods and services, local, national, international, many forms, gas station, roadside stand, e-commerce site. Competitive markets: a large number of independent buyers and sellers, standardized goods, no individual can dictate the market price, everyone is a price-taker, examples: wheat market, currencies market. Demand: a schedule or a curve that shows the various amounts consumers are willing and able to purchase at each of a series of possible prices, during some specified period of time. Substitution effect: a lower price gives an incentive to substitute the lower-priced good for now relatively higher prices goods, example beef vs chicken, beef is now cheaper than chicken, a consumer will buy more beef and less chicken.
