Week One Lecture Prof Paulone How does an economic system work when it is functioning properly? ...
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Transcript of Week One Lecture Prof Paulone How does an economic system work when it is functioning properly? ...
Week One Lecture Prof Paulone
How does an economic system work when it is functioning properly?
What mechanisms of social cooperation do we depend upon?
John Maynard Keynes :
The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy.
It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw correct conclusions.
Land Labor Capital Entrepreneurial Ability
Economizing - Allocate resources in a way that allows the
economizer to derive whatever he/she wants
Results from scarcity Involves trade-offs
Comparative advantage
Describes the ability of a person, company or country to produce a good or service at a lower cost relative to other goods and services. Even though a country may have an absolute advantage over another country, it still will be better off specializing in the good or service in which it has a comparative advantage and trading for goods and services it doesn't produce as efficiently.
Division of LaborAssigning of specific tasks to workers and productive resources; it is a reflection of economic specialization.
Economy
The careful or thrifty use or management of resources, such as income, materials or labor.
Economic SpecializationConcentration of activity in a few particular tasks or in producing only a few items.
Efficient Allocation of Resources
The allocation of an economy’s resources among the production of different products that leads to the maximum satisfaction of consumers’ wants, thus producing the optimal mix of output with scarce resources.
Macroeconomics
The study of economics in terms of whole systems with reference to general levels of output and income and to the interrelations among sectors of the economy.
Microeconomics
The study of economics in terms of individual areas of activity (as a firm, household or prices).
Productivity
The amount of physical output for each unit of productive input.