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If we all lived by making our own food and clothes then there would be no trade, but because of trade we compete to find the lowest prices for our goods to get more consumers.
Market economies need institutions to enforce property rights, which is the ability of an individual to own and exercise control over scarce resources.
Inflation is one of the main reason why prices rise too, and is defined as an increase in the overall level of prices in the economy.
When the government makes large amounts of money, the value of the U.S. dollar goes down.
When there is inflation then the unemployment levels go down, but when there is no inflation then unemployment goes up.
This is called a short-run tradeoff between inflation and unemployment.
A Business Cycle is fluctuations in economic activity, such as employment and production.
There is also something called opportunity cost and is defined as, what you give up to get an item.
When the market fails, the government can intervene to promote efficiency and equity.
The differences in living
standards around the world are always staggering.
When you are comparing
anything with money, it is
called the standard of living,
which people do every day without
knowing it.
Productivity is the amount of goods and services produced from each hour of a worker's time.
Market power is the ability of a single person or firm to unduly influence market prices.
Decisions require you to compare costs and benefits of alternatives.
Example
Economists make an assumption that people are rational. Therefore it is the moment when they make a small adjustment to the plan that they have thought out in their head.
Rational people systematically and purposefully do the best they can to achieve their objectives.
If you plan to go to a dance and then while you are
there decide whether to talk to a girl that caught your eye, is how people think at the margin by marginal change which is a small incremental adjustment to a plan of action.
Since markets are such a good way to organize economic activity, most countries are developing a market economy which is an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services.
In a store managers decide what the price should be and who the audience is or who they are targeting.
By competition people gain from trading.
People and Countries gain good things that they might need from trade.
Trade allows people and countries to specialize in what they do best with a better variety of goods and services.
Whenever marginal changes in
cost or benefits happen, it
motivates people to respond.
So.....when people like or see
something that is better than what
they have then they will respond
to the better objective.