tailieunhanh - Lecture Economics (6/e): Chapter 4 - Stephen L. Slavin

Chapter 4 - The mixed economy. Chapter objectives: The three questions of economics; profit motive, price mechanism, and capital; the circular flow model; market failure and externalities; the economic role of capital; the importance of specialization; the decline and fall of the communist system. | Chapter 4 The Mixed Economy Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-1 The three questions of economics Profit motive, price mechanism, and capital The circular flow model Market failure and externalities The economic role of capital The importance of specialization The major “isms” capitalism, fascism, communism, and socialism The decline and fall of the communist system Chapter Objectives 4-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Three Questions of Economics What shall we produce? How shall these goods be produced? For whom shall these goods be produced? Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-3 The Invisible Hand The Price Mechanism Competition They all go together . . . You cannot have one without the others 4-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Adam Smith coined this term The invisible hand is a kind of economic guidance system that makes everything work out The invisible hand is made possible by people pursuing their own self-interest The bottom line is the “profit motive” The Invisible Hand Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-5 The price mechanism is based on the law of supply and demand Prices send signals to both consumers and producers The Price Mechanism 4-6 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. To have real competition, you need many firms in a particular industry You need so many that no one firm is large enough to have any influence over price When sectors of American industry are not very competitive the price system doesn’t work well The invisible hand becomes less active and more ineffective The forces of supply and demand are distorted Competition Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-7 In Conclusion The United States of America has an imperfectly functioning price system It functions in a less . | Chapter 4 The Mixed Economy Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-1 The three questions of economics Profit motive, price mechanism, and capital The circular flow model Market failure and externalities The economic role of capital The importance of specialization The major “isms” capitalism, fascism, communism, and socialism The decline and fall of the communist system Chapter Objectives 4-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Three Questions of Economics What shall we produce? How shall these goods be produced? For whom shall these goods be produced? Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 4-3 The Invisible Hand The Price Mechanism Competition They all go together . . . You cannot have one without the others 4-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Adam Smith coined this term The invisible hand is a kind of economic guidance system that .