TAILIEUCHUNG - Lecture Economics (18th edition): Chapter 2 - McConnell, Brue, Flynn's

Chapter 2 - The market system and the circular flow. After completing this unit, you should be able to: Differentiate between a command system and a market system; list the main characteristics of the market system; explain how the market system decides what to produce, how to produce it, and who obtains it; discuss how the market system adjusts to change and promotes progress; describe the mechanics of the circular flow model. | The Market System and the Circular Flow Chapter 2 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives Economic systems Market system characteristics Market system questions what, how, and who Change and progress in the market system The circular flow model 2- Economic Systems Set of institutional arrangements Coordinating mechanism Differ based on: Who owns the factors of production What method directs economic activity 2- Economic Systems The market system Private ownership Markets The command system Government ownership Central planning board 2- Index of Economic Freedom Free Mostly Free Mostly Unfree Repressed 1- Hong Kong 3- Ireland 5- United States 20- Belgium 31- Spain 48- France 101- Brazil 126- China 134- Russia 148- Venezuela 156- Cuba 157- North Korea Ranking of 157 countries for 2008 2- Market System Characteristics Private property Freedom of enterprise and choice Self-interest Competition Markets and prices 2- Market System Characteristics Technology and capital goods Specialization Division of labor Geographic specialization Use of money Active, limited government 2- Market System Questions What will be produced? consumer sovereignty dollar votes How will goods be produced? technology resource cost 2- Market System Questions Who gets the output? willingness to pay How is change accommodated? self-interest How is progress promoted? technological advance capital accumulation 2- The Invisible Hand 1776 Wealth of Nations by Adam Smith Unity of private and social interest Virtues of the market system Efficiency Incentives Freedom 2- The Command System Soviet Union, Eastern Europe, China System was a failure The coordination problem Set output targets for all goods The incentive problem No adjustments for shortage or surplus 2- Circular Flow Resource Market Product Market Businesses Households 2- Costs Money Income Revenue Consumption Circular Flow Resource

• Kinh tế học
• Lecture Microeconomics
• Economic problem
• Economic principles
• Economic policies
• Market system
• The circular flow
• Microeconomics theory
• Microeconomics applications
• Kinh tế vĩ mô
• Scope of microeconomic theory
• Normative analyses
• Demand curves
• Supply curves
• Consumer choice
• Theory of consumer choice
• Consumption choices
• Substitution effects
• Consumer choice theory
• Excise subsidies
• Economic efficiency
• Competitive equilibrium
• Relating output to inputs
• Empirical estimation
• Cost of production
• Shortrun cost
• Profit maximization
• Perfectly competitive markets
• Competitive model
• Excise taxation
• Monopolist’s demand
• Marginal revenue curves
• Product pricing
• Monopoly power
• Monopolistic competition
• Cournot model
• Game theory
• Economics of information
• Noncompetitive market models
• Iterated dominance
• Input demand curve
• Leisure choice
• Wage rates
• Minimum wage
• Hidden costs
• General equilibrium analysis
• Public goods