EC120 Lecture Notes - Lecture 1: Market Power, Externality, Market Failure
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EC120 Full Course Notes
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Limited nature of society"s resources (e. g. water, oil, lumber) The study of how society manages it scarce resources. How much to work, save, and spend. How to allocate (divide) resources between competing interests (national defence, consumer goods, protecting the environment, other needs) A branch of economics to study the behaviour of: Relies heavily on math (upper year ec270) Labour/ leisure tradeoffs: working longer hours (results in more money) leaves less time for leisure(spending money) Study/party tradeoffs: going to a party the night before your midterm leaves less time for studying. Society faces an important tradeoff: efficiency vs. equity. Efficiency: when society gets the most from its scarce resources. Equity: when prosperity is disturbed more fairly among society"s members. Hypothetical tradeoff: to achieve a greater equity, we could redistribute income from wealthy to poor. Redistribution generally accomplished through a progressive tax system and social programs. Earned income provides an incentive to work (taxes reduce the incentive to work)