ECON 208 Lecture Notes - Invisible Hand, Opportunity Cost, Resource Allocation

• School: McGill University
• Department: Economics (Arts)
• Course: ECON 208
• Professor: Mayssun El- Attar Vilalta

Document Summary

Economic transactions: shipments arrive, final goods, raw materials, parts of cars, oil, local firms manufacture their products. Adam smith self interested people, allow them to interact, they create a social order, people are moved by self interest, not benelovence he assumes people in the economy are self interested (motivated by their own desires/wants/needs) Efficient organization sponatneous generated order works well: it works relatively well. Efficiency: refers to organizing available resources to produce the goods and services that people most value when they most want them and by using the fewest possible resources to do so. Adam smith describes this process as though it was guided by an invisible hand. Characteristics of market economies self interest guides individuals (they will buy and sell what is best for them) Individuals respond to incentives: they want to sell more if the price is high and less if the price is low.