ENVS 1000 Lecture Notes - Lecture 2: Planned Economy, Mixed Economy, Free Market
13 Dec 2016
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ENVS Chapter 3 Notes: Economics
Microeconomics:
● How individuals and businesses make decisions and allocate resources
● Supply, demand, pricing
Macroeconomics:
● Behavior of the economy on the broader scale
○ (national, global…)
● Market successes and failures, external costs and benefits
Markets:
● Where willing buyers and sellers come to exchange goods or services
● Free markets:
○ Where only the interactions of buyers and sellers matter
○ No regulations or taxes
○ Prices set by supply or demand
○ US is not quite a free market economy
■ Bans and restrictions on certain activities
■ Regulations
■ Taxation
■ Trade barriers
■ Subsidies
● Planned economy:
○ Most or all aspects of the economy are controlled
○ Mechanisms are used to regulate the interactions of buyers and sellers
○ Ex: taxes, rebates, subsidies
● Mixed economy:
○ Most economies are neither purely free nor purely planned. Free economies are
often taxed and subsidized
Price of a product:
● Includes:
○ Raw materials cost
○ Cost to market, and distribute
○ Supply and demand
○ Other factors such as exchange rates, trade agreements, etc
● Doesn’t always include (Externalities):
○ Costs of health impacts
○ Some national military or security costs
○ Costs of cleaning up pollution
○ Governmental costs
○ Lost productivity
Some options for dealing with externalities:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
How individuals and businesses make decisions and allocate resources. Behavior of the economy on the broader scale (national, global ) Market successes and failures, external costs and benefits. Where willing buyers and sellers come to exchange goods or services. Where only the interactions of buyers and sellers matter. Us is not quite a free market economy. Most or all aspects of the economy are controlled. Mechanisms are used to regulate the interactions of buyers and sellers. Most economies are neither purely free nor purely planned. Other factors such as exchange rates, trade agreements, etc. Add a per unit tax to the production of a good. Allow private entities to sort it out with the help of laws/courts. This can allow for a more economically efficient solution than a taxation approach. Any value that cannot be measured by economic means. Free market systems measure some of the costs of transactions.
