Political Science 1020E Lecture Notes - Communism, Effective Demand, Profit Motive

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Key questions answered in different types of markets. A pure capitalist free market: private property rights individuals and firms, production for profit profit motive, voluntary exchange laws of supply and demand, free competition anyone can decide to produce any good for sale. Markets satisfy people"s wants: only if they have the money markets do not respond to demand, markets respond to effective demand = wants backed up by resources (money) Markets, by themselves, don"t always function efficiently. Improving the free market internalize the externalities make those involved pay. Make it illegal to produce some goods with externalities. State provides public goods and taxes citizens to pay for them. The original position (op) models equality of concern. Pops (people in the original position) must be impartial: veil of ignorance rules out bias, can"t benefit self at expense of others, don"t know anything about self: intelligence, economic class, talents, sex, race, social status .

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