nake economics

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