ECON 1011 Chapter Notes - Chapter 5: Necessity And Sufficiency
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ECON 1011 Full Course Notes
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Document Summary
The assumptions of the pure exchange model (self-interest, mutually voluntary exchange, perfect information) imply that the individuals have ethics and morals: people have to adhere to a set of ethical principles. Self-interest assumption is necessary because without it trade will not occur. Trade requires willingness from both individuals to cooperate with each other markets need social cooperation. Ethical ideas of self-sufficiency will not work with trade. Many people have had incidents where products purchased were not the ones thought we were buying: ex: smith sells oranges, some are bad, but wraps it in plastic and places good ones on top. If jones (buyer) asks if all oranges are good, smith can lie, and say they are. Perfect information occurs in the real world with regular buying of products if trades occur occasionally or only once, consumer does not have perfect info. Deception occurs when a terms of trade with false information takes place.
