Fundamental factors behind the workings of economic systemsand the economics of markets

RE 165 SESSION 2

Economic AssumptionsSelf-Interest Seeking BehaviorRisk Averse BehaviorRational BehaviorBehavior of a person who is free to choose

versus one who does not understand freedom or restricted freedom

Economic IngredientsEconomic Man (Human Resources)

KnowledgeSkillsAbilitiesHybrid: Creativity & Reason (Technology)

ResourcesLandEnergyCapital

Exercises in Economic SystemsAgricultural EconomiesEmpiresFeudalismMercantilismColonialismIndustrialismCapitalism/SocialismIntegrated Socialism: Globalization

FundamentalsFreedom of choice (individualism)Protecting against market failure

(justice/equity)Protecting against the excesses of

protecting against market failure.Risk-sharing and productivity (laissez

faire)Reason and knowledge (controlling

government before it controls us)

DemandForces

Size of marketELASTICITY: Intensity of desire for

product/service (need or want)Ability to pay for product/servicePrices of substitutes and complementsInstitutions and property rights

SupplyForces

Number of competitorsTechnology and resourcesProductivity in the use of resourcesSavvy in production, marketing distribution,

and sale of product/services …