ECON 201 Chapter Notes - Chapter 7: Opportunity Cost, The Takeaway, Prediction Market
3 Mar 2019
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Document Summary
A price is a signal wrapped up in an incentive. Great economic problem: to arrange our scarce resources to satisfy as many of our wants as possible. Speculation: the attempt to profit from future price changes. Futures: standardized contracts to buy or sell specified quantities of a commodity or financial instrument at a specified price with its delivery set at a specified time in the future. A prediction market: a speculative market designed so that prices can be interpreted as probabilities and used to make predictions. From oil to candy bars and brick driveways: Higher energy costs increase the cost of producing most products, including candy bars. As the price of oil increases, the brazilians have shifted sugar cane from sugar production to ethanol production, holding down fuel costs by increasing the cost of sugar. Markets around the world are linked to one another.
