Washburn2. August 21, 2014Econ 101- Turchio What does an economy system need to do to be successfulo Has to ask and answer 3 Questions (Coordination Tasks)o “What needs to be produced?”o “How will these things be produced?o “How much should be distributed to each member of the economy?”o Who gets what, and how is that determinedo Three major actorso Householdso More than just demanders of goods and serviceso Can also be suppliers, workers, offer land, have capitalo Thought of as a single person in the courseo Can be a mistake one getting higher upo Makes 2 Decisionso How to spend moneyo What to buyo How much to buyo How to sell/rent the resources that the household haso Laboro Can own the land or the capitalo Business firmso Makes the decision about what gets produced, how much, and in which ways (how)o Businesses will act to maximize profitso Not always about $$o Turns inputs into outputso What other goals could there be??o Central Authorities/ governmentso All types and levelso Federal, State, Local, city, water basino Not always cooperative with other governmentso Federal Reserve fights with Congresso Market- An area over which buyers and seller debate over the sale of goods and serviceso Online marketplaces- everywhere and nowhereo Black markets- all over, not just one locationo International market for foreign exchangeo Place for money to be exchanged between currencieso Product Marketo The goods will be used by the customer, not resoldo Factor Marketo Market for factors of productiono Inputso LaborWashburno Steelo Lumbero Electricityo A product can be a good for one consumer, and a factor for anothero Market Economy- An economy that contains many marketso Opposite is Command Economyo Command Economy- The central authority answers the 3 questions, not private businesseso Free Market Economy- bulk of decision are made by actors in the market themselveso Capitalist Economy- The means of production are owned by the private sector, not a central authorityo Capital- The produced means of productiono Opportunity cost of collegeo Imputed costso Party Timeo Lost Wageso Direct Costso Tuitiono Extra cost of Room and Boardo Books-supplieso Feeso Cost of travel to schoolo Production Possibilities Frontier (PPF)PaymentsFactor SvcsFIRMSBuy Factor SvcsProduce & SellCommoditiesHOUSEHOLDSSells Factor SvcsBuy
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