ECON 201 Lecture Notes - Lecture 12: Market Failure, Externality, Market Power

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Make inconsistent decisions - changing governments, differing agendas. Decisions are made at the margin - economic agents compare marginal bene ts to marginal costs: market- area in which buyers and sellers negotiate the exchange of a commodity. Resource markets: circular flow diagrams- on paper, evolution of market economic. Possibility of exchange enhanced by : introduction of money , population increases , transportation /communication improvement. Differences between economies : private vs. public ownership. Markets vs. commend systems - in commend system has central government that dictate everything: people respond to incentives. Market system tends to coordinate individuals decentralized decisions -adjustment can lead to price reduction. Microeconomics - study of the behaviour of individual agents and markets. Macroeconomics- focus on broad aggregates such as overall production , employment , prices , etc: key issues in micro: Ef ciency - society is getting the most it can from scarce resources. Equality - distributing income fairly among members of society.

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