ECON 1200 1st Edition Lecture 6- When a country participates in voluntary trade, the country as a whole gains, but some individuals in the country may loseo Job availability decreaseso Consumers and workers producing exports gain, but workers producing imports loseo Consumers gain because they can consume a larger variety (and more) goods- In the US, the Trade Adjustment Assignment program provides funds for worker who have lost their jobs due to international trade. Qualified unemployed workers can use these funds to pay for retraining, to search for new jobs, or to relocate to areas where new jobs are available- Free Trade- Trade between countries that is without government restrictions- Trade Restrictions- Reduce or eliminate the gains from tradeo So most economists advocate free trade- In most modern economies, trade takes place in a market- Market- A group of buyers and sellers of a good or service and the institution by which they come together to tradeo Only one buyer and seller are necessary to form a market and a market may be physical, virtual, legal, or illegal- Households and firms interact in 2 kinds of markets:o Product Market- A market for goods and services (like computers and medical treatments)o Factor Market- A market for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability.  Factors of Production- The inputs used to make goods and services Labor- Includes all types of work by peopleThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Capital- Manufactured goods that are used to produce other goods and services- In economics, capital refers to physical capital (such as machines, computers, tools, etc)- In everyday language, capital could refer to financial capital (such as cash, stocks, bonds, and bank accounts)- Financial capital is not a productive resource, so economists do not consider financial capital as capitalo Natural Resources- Include land, water, plants, animals, oil, mineral deposits, etco Entrepreneur- Someone who operates a business, bringing together the factors of production (labor, capital, and natural resources) to produce goods and services Entrepreneurship is risky (About ½ of all new business close within 4 yearso In factor markets, firms are buyers and households are sellers- Circular-Flow Diagram- A model that illustrates how participants in markets are linked- Scarce resources can produce only limited quantities of goods and services, so societies must make choices when deciding what goods and services to produce, how to produce them, and who consumes themo To make these decisions, societies organize their economies along a continuum between a centrally planned economy and a market- Centrally Planned economy- The government decides when and how economic resources will be allocated. The government decides what is produced, how to produce it, and who gets to consume ito To get this right would require huge amounts of information, money, and powero Lack of incentives to work (You don’t get anything more from working harder or developing a new way to do something)- Market Economy- An economy in which the decisions of markets and firms interacting in markets allocate economic resourceso In a market economy, consumers and firms decide what is producedo It comes down to what consumers are willing to pay foro The wants of consumers will determine what is