SOCY 1072 Lecture Notes - Lecture 9: Equilibrium Point, Demand Curve, Efficient-Market Hypothesis
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Adam smith: free market capitalism: supply and demand curve. When demand for a product is high, the price would be high: if supply exceeds demand, the prices go down. An efficient market will reach an equilibrium point in which supply is the same as demand: maximizing the exact level of productivity, invisible hand. It moves the market around so it hits the equilibrium point. Millions of interactions a day will cause the market to adjust to the way we vote with our money: rational self-interest. The economy believes we are rational/purposeful individuals and that we will carefully asses the products we buy, compare the quality and price, compare which products are best to buy, and then execute. You"ll shop around figuring who has the best type of product at the best price. We"re the best people to figure out how we"re going to spend our own money: role of government.