Week 1: Markets and Efficiency Lecture + Seminar Flashcards
What is the key function of the economy?
Provisioning
Define economy
- The system by which we provide for our needs, as a society but also individually
- Also identifies the process by which goods and services are exchanged, which also generates income + prose problems of redistribution and inequality
What are the central problems of economics?
Scarcity and choice, which forces societies to face opportunity costs and the challenge of sustainability.
Describe the relationship between economy and society.
- Nature: economic activities take place in an environmental context
- Access to land (used for housing, agriculture), water defines your capabilities
- Consequences: greenhouse emissions, conflict, influence
What are markets? Define.
A market is any place where there is a form of interaction between buyers and sellers as production is meant for exchange.
Explain the laws that govern exchange between buyers and sellers.
Producers cannot charge consumers whatever they want and buyers cannot pay whatever they like - therefore, there needs to be an equilibrium between demand and supply.
Explain the laws that govern the exchange between buyers and sellers (CONTINUED)
Broader set of rules that govern the exchange within the system: competition - perfect competition (lots of small firms), monopolies, oligopolies
Define a mixed economy
A form of economic system which is a combination of the planned and market economic system, with some resources being owned and controlled by private individuals and firms while others are owned and controlled by the gov in the public sector.
State examples of mixed economies
Belgium, France, Italy, Spain, Mexico and the Philippines
Describe the role of the state in relation to market failure.
When market failure occurs, it is justification for the government to intervene.
- many find this approach dangerous as it portrays the role of government as “fixers”, and takes away the idea that the state can be entrepreneurial.
Can states have a significant role in the economy?
Yes - many research projects (e.g tech development) are initiated by the government
Define factor endowments.
Refers to the quantity and quality of a country’s factors of production.
Describe the relationship between factor endowments and economic growth.
The more factor resources that a country has, the more likely it is to achieve economic growth.
Relationship between factor endowments and inequality.
Different countries have different factors of production. The value of each factors of production changes over time.
Different countries have…
Different factors of production (e.g The USA and Saudi Arabia are well-endowed in the supply of oil, France has plenty of arable land for its agricultural output, and Australia has many natural resources for production such as coal, gold and iron ore)
