ECON 1B03 Lecture Notes - Lecture 1: Perfect Information, Planned Economy, Used Car

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Economics- study of how society allocates its scarce resources to satisfy peoples" unlimited wants. Scarcity- society has limited resources and cannot produce all the goods and services people want. Microeconomics- individual parts of economy; households/firms (h/f) make decisions and interact in product. Types of economies: market economy- decisions made by h/f by allocating resources through decentralized (authority transferred from central government local) of h/f. H: what to buy and who to work for. F: how much to produce and who to hire: command/central planned economy- all production and distribution decisions made by central authority. Ex: government: traditional economy- decisions made based on customs, beliefs, religions and habits. Typically: underdeveloped countries that who"s economies depend on agriculture for domestic consumption: mixed economies- combination of market and command economies. Economic rationality- systematically and purposefully using info to make the best decisions for oneself to maximize benefits and satisfaction. Perfect information- everyone knows everything without uncertainty when making decisions.