ECON 1B03 Chapter Notes -Progressive Alliance Of Socialists And Democrats, Monopolistic Competition, Market Failure

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Economy: study of how society allocates scarce resources to satisfy people"s unlimited wants. Scarcity: society has limited resources, therefore cannot produce all goods and services that consumers wish. Market economy: allocates resources through a decentralized decisions of the individuals & households, ex. Command economy(centrally planned economy): all production/distribution decision made by a central planner (soviet union) Traditional economy: economic decisions based on long standing costumes belief, religion and habits: applies often to 3rd world underdeveloped countries, these usually have little industry, mostly agricultural, subsistence economy. Mixed economies: combination of market & command economy, ex. Economic rationality: making decisions that maximize benefits that we receive from our decisions. Perfect information: we know everything about everything: ex. Firms know all prices how other firms react to changes made: we assume that we have perfect information. Asymmetrical information: in practice, its hard to have perfect information, as lack of it makes decisions hard to make: usually sellers have more info than buyers do.