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ECON 208 - Notes, week of Sep 1

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McGill University
Economics (Arts)
ECON 208
Lee Ohanian

Adrienne Pacini ECON 208 WEEK September 1 2009 ECONOMIC ISSUES AND CONCEPTS The Complexity of the Modern Economy The SelfOrganizing EconomyEconomy a system in which scarce resources are allocated among competing usesAn economy based on freemarket transactions is selforganizingSpontaneous economic order is produced when people follow their own selfinterest o It is selfinterest rather than benevolence that motivates people o Therefore selfinterest is the foundation of economic order Efficient OrganizationEconomic order is relatively efficientEfficiency is attained when the largest amount of goods and services are produced with the least possible amount of resourcesFreemarkets are guided by an invisible hand o Referring to the spontaneous order that is produced Main Characteristics of Market EconomiesSelfinterest buying and selling what seems best for themIncentives sellers want to sell more when prices are high and buyers want to buy more when prices are lowAll activities in the market are governed by institutions o Private property o Freedom of contract o The rule of lawScarcity Choice and Opportunity Cos
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