ECON 1201 Lecture 5: Introduction to Markets

• School: UConn
• Department: Economics
• Course: ECON 1201
• Professor: Derek Johnson

Document Summary

Econ 1201 lecture 5 introduction to markets. Interaction of households and firms: three primary markets, goods and services (product, labor (factor, financial (savings and investment, prices signal relative costs and values, reflect relative scarcity, reflect opportunity cost, without normative or value judgements. Wrapped in incentives: we react (producing/consuming more or less) in predictable ways to price changes, prices are coordinating our actions independently. If prices are suppressed (price controls: suppressing information regarding relative scarcity, suppressing incentives to innovate by entering the market with added goods or services. Caveats: prices generally reflect relative scarcity or opportunity cost (what we"re giving up), but not always, down the road externalities, markets generally create socially productive incentives, but not always, down the road healthcare market. Prices, markets, and cooperation: economy is complex network with dispersed knowledge. Free markets: markets are socially constructed, reflect cultural and ethical values of a society.