ECON 105 Chapter 1: Econ 105 Review of Chapter 1

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ECON 105 Full Course Notes
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ECON 105 Full Course Notes
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Document Summary

Many choices are not whether to do something but how much. How much choices are made by making a trade-off at the margin. Because people usually exploit opportunities to make themselves better off, incentives can change peoples behaviour. A feature of most economic situations is the interaction of choices made by individuals, the end result of which may be quite different from what was intended. In a market economy, interaction takes the form of trade between individuals because there are gains from trade. As far as possible, there should be an efficient use of resources to achieve society s goals. Efficiency is not the only way to evaluate an economy; equity may also be desirable and there is often a trade-off between equity and efficiency. Markets normally are efficient except for certain well-defined exceptions. When markets fail to achieve efficiency, government intervention can improve society s welfare.

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