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Lecture 1

ECN 211 Lecture 1: Macro ECON Notes (all)

26 Pages
28 Views

Department
Economics
Course Code
ECN 211
Professor
Brian Goegan

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Description
The Invisible Hand: Adam Smith The Fundamental Economic Problem: The material wealth of our world is nite, we only have certain material goods. = Scarcity. This forces us to make choices about how resources are used. Choices imply costs. By selecting an option, you have given up all other options at that time. The cost is what we are giving up = Opportunity Costs. (The stuff we give up) Therefore, the fundamental economic problem is determining how to use our stuff. Vastness of this problem: ex. Humans use 100 gallons of water a day, consume 3,330 calories a day, 857,534 BTUs of energy a day, etc. Reminds us of the long list of steps it takes to make a soda. Adam Smith: The best allocation of resources in society will be achieved if everyone does what they think is best. For example, if the bauxite would be best used turned into a soda can, then do that. The Key Elements Free Markets: Anyone can enterexit a market and trade whatever they want. Consumers: buyers Producers: sellers Property Rights: Ownership and contracts are recognized and enforced. The beneciaries of the product are owners of the thing. The burdens fall on the owners. Rationality: People will choose their best option based on the information they have. Buyers and sellers translate costsbenets into monetary value Buyers > Willingness to pay Sellers > Willingness to accept Adam Smith: Competition will drive everything where it is supposed . o g o t
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