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• Economic Institutions


  Develop to satisfy the needs and wants
• Economic Institutions


  Norms that governs the production
• Economic Institutions


  Rooted in the problem of scarcity (People’s needs and wants: unlimited; Resources: limited)
• Factors of Production

  • Needed to produce goods and services
• Factors of Production


  • Land - natural resources (oil, water, minerals)
  • Labor - human resources, anyone who works to produce goods
  • Capital - used in the production process (tools, machinery, factories)
  • Entrepreneurship - organizational skills and risk-taking attitude required
• Types of Reciprocity


  • Generalized
  • Balanced
  • Negative
• Generalized reciprocity


  Involves giving gifts w/o any expectation of immediate return
• Generalized reciprocity


  • Giving birthday gifts
• Balanced reciprocity


  Exchange of goods and services w/ the expectation that the equivalent value will be returned w/in a specific period of time
• Balanced reciprocity


  • Selling vege in a market for money
• Negative reciprocity


  Exchange of goods and services between equals in which parties try to gain something more
• Negative reciprocity

  • Being respectful to get a promotion
• Redistribution


  Form of exchange where goods and services are given to a central autho and then relocated to create a new patterns of distribution
• Transfer


  One-way payment of money, no service is received in exchange
• Governments use payments as means of income redistribution by giving out money under social welfare programs (social security, disability pensions)
• Subsidies paid to exporters, farmers are not transfer payments
• Transfer payments are excluded in computing gross national product
• Market Transaction

  Exchange of goods and services through market
• Measuring gross domestic product (GDP)


  Taking place in the economy
• Market


  Nominal place where forces of demand and supply operate
• Market economies


  • Become nearly universal
  • Government does not directly control the economy
  • But it can encourage economic growth
• States


  Make rules to balance the qualification between seller-consumer relationship
• Market mechanisms


  1. Communicating the price info

  2. Determining price of traded item

  3. Facilitating deals & transactions

  4. Effecting distribution
• Roles of state

  • Essential roles
  • Beneficial roles
  • Politically generated roles
• Essential roles of state

  • Providing security
  • Establishing and reinforcing priority
  • Controlling currency