ECN 104 Lecture Notes - Lecture 1: Marginalism, Planned Economy, Invisible Hand

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Economy a system for coordinating society"s productive activities. Economics the social science that studies the production, distribution, and consumption of good and services. Market economy an economy in which decisions about production and consumption are made by individual producers and consumers. The alternative to the market economy is a command economy, in which there is a central authority making decisions about production and consumption. The invisible hand refers to the way in which the individual pursuit of self- interest can lead to good results for society as a whole. Microeconomics: the branch of economics that studies how people make decisions and how these decisions interact. Macroeconomics: the branch of economics that is concerned with overall ups and downs in the economy. When an individual pursuit of self-interest leads to bad results for society as a whole, there is market failure. Economic growth the growing ability of the economy to produce goods and services.

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