Popular in Economic perspective on inequality in America
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This 1 page Class Notes was uploaded by Alexandra Wolfe on Wednesday September 14, 2016. The Class Notes belongs to ECO 131 at Miami University taught by Selcuk Misirlioglu in Fall 2016. Since its upload, it has received 10 views. For similar materials see Economic perspective on inequality in America in Economics at Miami University.
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Date Created: 09/14/16
ECO 131 Week Two Word = Important term word= Important idea word= Example 10 Principles of economics (3-7) 3.) Trade can make everyone better off -Comparative advantage: Producing what you’re good at, and trading it for things you aren’t producing. 4.) Rational people think at the margin -Marginal benefit v. Marginal cost -Marginal Benefit: The additional benefit above what you’re already deprived -Marginal Cost: The additional cost to you over and above the costs you have already incurred - Marginal Cost < Marginal Benefit, means you should do it -Marginal Cost > Marginal Benefit, means you should not do it. 5.) People respond to incentives 6.) Markets are usually the best way to organize economic activity. - “Price Mechanism”: Refers to a system of supply and demand where the free play of market forces determines the prices of merchandises. -It is important to note that sometimes our government puts their hand in the market so that those of a lower income can afford things for basic living. 7.) Governments can sometimes improve the market outcome -Market power: The ability to control the market price by limiting supply. -Externality: A consequence of an economic activity experienced by unrelated third parties. -Positive: Helps society/ Positive affect -Negative: Doesn’t help society/ negative affect -Public Goods- Once it is produced, it is freely available to anyone who wants to use it. Terminology -Opportunity Cost: The benefit that you may have gained from choosing the next best alternative. -Market Force: An economic force that is given relatively free reign by society to work through the market. -Sunk Cost: The additional cost to you over and above the cost you have already incurred. -Efficiency: Achieving a goal as cheaply as possible Invisible Hand Theory -A market economy, through the price mechanism, will tend to allocate resources efficiently -When the quantity supplied is greater than the quantity demanded, price tends to fall -When the quantity supplied is less than the quantity demanded, price tends to rise.
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