intro to econ

• economics is the study of human behaviour & choice
• Opportunities and choices are limited by scarce resources
• Assumptions about human behaviour:

  people are rational, people respond to incentives, people use cost-benefit analysis
• Societies have limited resources but people have unlimited wants
• Societies face trade offs
• Market economy

  • Private sector only
  • Firms decide what to produce & how much to charge
  • Consumers decide how much to buy
• neo-liberal or neo-classical to describe economists who advocate for a free- market economy
• market-driven inequality in 19th century led to the creation of the socialism philosophy
• Socialism emphasizes community ownership of business, examples are co-operatives & state-owned enterprises
• If most businesses are state owned enterprises,  it is a communist economic system
• In a centrally-planned economy, the governments decides what is produced and directs resources to meet these targets
• Advantages of Centrally-Planned: rationing reduces inequality, can allocate societal resources more efficiently in a national emergency
• Disadvantages of centrally-planned: production is not efficient, difficult for government to choose right targets and allocate resources, lack of innovation
• Mixed economy

  Elements of both market & centrally-planned
• In a mixed economy: Most goods are provided by private sector, the government regulates aspects of market

  Public sector also provides goods and services directly
• Productive efficiency - goods & services are produced at lowest possible cost

   
• Allocated efficiency: a society's resources are used to produce a mix of goods & services that consumers actually want to buy
• Positive analysis - facts and logic
• Normative analysis - makes value judgements about whether what happens is desirable or not