ECON 219 Chapter 1
--> The complexity of the Modern Economy
- self-organizing : chain of events work together/interact without
- self-interest = foundation
--> Efficiency : resources being produced quickly in it's demand at low cost
Characteristics of Market Economies:
- self-interest guides individuals
- individuals respond to incentives
- prices + quantities set in relatively free market, individuals trade voluntarily
- institutions -> created by state protect property, enforce contracts
Scarcity : not enough resources to fit demand. There will always be scarcity
Resources : land, labor, capital (physical methods of productivity, metal/tools/etc.)
- "factors of production"
- goods and services
RESOURCES --> CHOICE --> OPPORTUNITY COST
Choice: deciding which resource is most in need
Opportunity cost : the price of the choice (using next best option)
--> prices in a market economy reflect scarcity
FOUR KEY PROBLEMS of any economy
1. What is Produced and How?
--> resource allocation
2. What is Consumed and by Whom?
* Microeconomics : the study of the allocation of resources as it is affected by the
workings of the price system.
--> who decides what is distributed?
3. Why are Resources Sometimes Idle?
--> an economy oprating inside production possibilities is either neglecting to
use all of it's resources or is using them inefficiently.
--> why are there working seeking jobs who can't find them?
--> should canadians/governments worry about idle resources? can anything
be done? 4. Is Productive Capacity Growing?
--> two ways to get growth (assuming resources are being used effici