ECON 101 Chapter Notes - Chapter 1: Loud Music, Marginal Cost, Market Economy

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20 Nov 2012
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ECON 101 Full Course Notes
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Economics is a subject that studies economics behaviour of people. Basic assumption: rational behaviour (always want more goods, money, happiness; But there are limited resources (scarcity of resources); conflicts with ^ Must be a way to decide how resources are allocated. 2 ways: command economy (somebody decide for everybody else); market economy. Competition through price system (determines ownership - highest bidder gets the good) Firms buy own raw material and use own technology. Production possibilities frontier: shows all the possible combinations of goods that can be produced. To produce more cars = higher marginal cost. If government does something, (spends in education), 100 dollars maximizes welfare --> spent efficiently equity: everybody benefitted equally, (if two people, each receive 50, equal, but not efficient because maximum is 110. ) Speak from one side: 50+50=100 (so-so equity, action is equitable, equal) Speak from other side: 100+10=110 (not equal, but more efficient) Equality and efficiency may not happen at the same time.

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