The Power of Markets•In order to understand economics you must understand markets and how they work. Markets are created when an exchange of goods and services take place. They are composed of individuals and businesses trying to maximize their utility. The market economy is a powerful force for making our lives better. •Maximizing a person utility doesn’t mean their being selfish, but it all depends on what gives the person utility. •The objective of business is to make profit and profit opportunities attract business. •There are several different types of barriers for new firms to get into a market such as physical, natural, or legal. •As we get wealthier we pick up more luxury goods, which are items that we purchase more of as our income increases. •Preferences that want to protect the environment would be considered a luxury good. •Is it fair for those of us who live comfortably to impose our preferences on those in developing world?
•Markets use supply and demands to set prices for goods and services, finding the equilibrium. •Because we use price to allocate goods, most markets are self-correcting.
Incentive Matters•Individuals need incentives to encourage positive economical behavior. •People will be productive only to the extent of incentives.
•Government policies must be written to incentivize the behavior for desired outcome.
Government and the Economy•Government has an enormous role in economics, and its essential to understand the effects of government involvement in an economy. •Externality is the gap between the private cost and the social cost of some behavior.•Leaving markets alone isn’t always the best solution because there could be great social cost from markets•Taxing behaviors that have negative externalities can incentivize alternative behavior.
•Economies and markets aren’t possible without good governments.•Government policies and regulations, like property rights, encourage individuals to pursue market endeavors. •As technology progresses so do government policies, in particular with Internet industries.
Government and Economy II•Governments aren’t anti market; monopolies can cripple an economy.•Government should stay away from being the sole provider of a good or service unless there is reason why private companies can’t do it.•This still leaves government with national defense and some health care.
•Government doesn’t have to actually do the work. They can hire private companies, like construction workers to build roads and bridges
•Countries who don’t protect property rights and simply regulate heavily are “grabbing hands” and not “helping hands”. They consist of rich bureaucrats who never actually provide safer or healthier conditions to consumers and workers.
Economics and Information•Government and people need as much information as possible to make the best decisions available. •Branding is a major part of information that contributes to an individual’s economical behavior.•People have reliability or trust in your brand, which affects their purchases.
•Racial profiling can also be apart of information affecting our decisions.•The more factual information that is available for someone the less prejudices or stereotypes will be involved.
Productivity and Human Capital•Human capital is on of the most imperative capital that will determine your productivity capacity. •It’s what is left of you if you were stripped away of all your assets. •People with high human capital do well in job market, while opposite is true.
•Globalization makes more opportunities for skilled workers and more competition for unskilled workers. •There is an ever-increasing income gap between low-income and high-income individuals.•Should we do anything about the expanding gap between high-income and low-income people because the expanding gap with give unskilled people incentive to gain human capital, like becoming more educated? •The...
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