ECON 1116 Chapter Notes - Chapter 1: Comparative, Absolute Advantage, Economic System
13 Feb 2014
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Document Summary
Microeconomics: the branch of economics that studies how people make decisions and how these decisions interact. Economics: the social science that studies the production, distribution, and consumption of goods and services. Economic system: a collection of institutions that determines how resources are allocated: traditional, command, market. Market economy: is an economy in which decisions about production and consumption are made by individual producers and consumers. Alternative to market economy is command economy when there is a central authority making decisions on production and consumption. Market failure: when individual pursuit of self-interest leads to bad results for society as a whole. (air/ water pollution): recessions: downturn in economy. (workers may be laid off) Scarcity: the inability to satisfy our desire with available resource. The approach we adopt is to build models of economic decision-making scenarios and draw insights from those models: what makes a good model? (to yield insights of the economy, how to balance model simplicity with complexity.
