GEOG 216 Lecture Notes - Lecture 2: Private Good, Moral Hazard, Mixed Economy
6 Mar 2019
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Friday September 7, 2018 Lecture 2 – structure and organization of economies
What is an economy?
- A system to be able to meet your needs
- What to produce/ how to produce/ who gets what → influence economy
- Scale independant: scale that we observe does not influence nature of that economy
(citywide; global; etc. like an ecosystem)
o Address the economic problem – meet people’s needs and wants where
resources are scarce and limited
▪ Scarcity leads to tradeoff that leads to choices (choices are inevitable)
- Production possibilities frontier (way it is classically described)
o Tradeoffs – end up showing us what their preferences are
▪ Make choices
▪ Frontier illustrates this tradeoff
▪ You have a certain amount of resources that you can allocate to two
different things
▪ How do you move the frontier outwards?
o Production possibilities traces out what you want to persue
o Valuation – emphasis you put on either good by looking at how they get
combined together
o Opportunity costs – more consumption goods leads to less military goods and
vice versa – an extra hour of parting is an hour less of studying
o Economic growth – economies grow because they are able to produce more of
all goods
▪ To allocate resources that are limited in a way that achieves the way you
get the maximum production in this frontier
Some key economic terms
- Economic agents
o Any individual that is active in consumption and production
o How do we use resources? What is needed/ wanted?
o Individuals, firms, coops, governments acting alone or together
o Anyone that is acting together to makes these productive decisions
- Economic institutions
o Specific meaning
o A set of norms and rules that govern commerce, trade and consumptions and
production
o All around can be a labor union, law and contract, inforcements, everywhere
they are what guide us to the economic exchange that we make
▪ World is built on instutuitons (social and institutional)
o Example
▪ We are engaged in a social institutions – the institution governs how we
relate to eachother
▪ Part of this is that one teaches the other learns
▪ There are way to act
Document Summary
Friday september 7, 2018 lecture 2 structure and organization of economies. A system to be able to meet your needs. What to produce/ how to produce/ who gets what influence economy. Individuals, firms, coops, governments acting alone or together: anyone that is acting together to makes these productive decisions. Institutions allow us/ guide us to make certain choices: these are fundamental in the economy. Factors of production (3: land minerals, any natural resources used in production, water, forest, labor any physical or mental effort that contributes to the, capital investment of wealth (allocation of resources) Goods and services: what is produced after an economic activity, private/ public goods. If everyone got the same amount that wouldn"t be efficient: moral hazard overestimate bid to sell later. Government participates as an economic agent buying and selling things as well as capturing revenues and taxes: have a role in shaping the way the world works in a mixed economy.
