Microeconomics Week 2 Notes
Microeconomics Week 2 Notes ECON 2023
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This 2 page Class Notes was uploaded by Riley Goodman on Tuesday February 2, 2016. The Class Notes belongs to ECON 2023 at University of Arkansas taught by Jeffrey Cooperstein in Summer 2015. Since its upload, it has received 27 views. For similar materials see Principles of Economics: Microeconomics in Economcs at University of Arkansas.
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Date Created: 02/02/16
Three Types of Economic Systems: 1 Traditional Economies - Economy base on trade (Amish, some tribal economies) o Barter, trade o No central means for trade o Inefficient to raise quality of life and consumer utility 2 Command Economy - Decisions made by government o Karl Marx is the father Command economic theory Wrote in the era of industrial revolution, published Das Capital, influenced communist style command economy. o Lack of "Incentive" o Lack of Innovation o Lack of Individualism or choice o Coordination Problem - Misallocation of resources and inefficient production of consumer goods due to supply being government controlled Without free market demand telling producers what to produce, the wrong consumer goods are often produced Demand for different types and quantities of goods differs with each consumer Surplus - Too many goods produced to satisfy demand in a specific market Shortage - Not enough goods produced to satisfy demand in a certain market o Less diversity in everything o All resources, production allocation, and decisions are under control of government o There has never been a pure command economy 3 Capitalist/Market Economy - Decisions being made by producers and consumers o Adam Smith is father of Capitalist economic theory o There has never been a pure Capitalist/market economy o Laissez Faire Capitalism - Government solely physically protects the people and enforces contracts o Buyers and sellers determine market values and prices o Supply is influenced most by demand o Right to private property - Individual's right to property o Freedom of choices - Freedom of employment, production, resource allocation etc... o Freedom of enterprise - Right for companies to possess resources and profit from business o Competition exists and promotes innovation and lowers prices, promotes efficiency o People act in self-interest Not selfish Promotes competition and increases quality of life Pure Mixed Command Economy Economy
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