ECON 101 Lecture Notes - Lecture 1: Mixed Economy, Monetary Base, Average Variable Cost
Document Summary
Scarcity: finite resource and infinite wants and desire. Opportunity cost: next most valuable option not taken. The allocation of scarce resources amongst competing ends. Socialism: the means of production are centrally owned, produced, and distributed. Prices are a signal wrapped in an incentive. If policy achieves the ends it is a good policy, if not, bad. Both believers of capitalism and believers in socialism think their system is most efficient. Economic efficiency: maximizing use of resources, but it takes into account opportunity cost. Pareto efficiency: no move can be made to make somebody better off without making somebody worse off. Broken window fallacy: rock through window makes work for window fixers. Landsburg: seat belt laws; incentive to wear seat belt. A reason to do or not to do something. Moral hazard: drivers feel safer with seatbelt on, so they drive more reckless. Safer to have a giant spike instead of airbag.
