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Economics Chapter 3

Basic Principles of Free Enterprise:
1. Competition – Rivalry among sellers
2. Free Contract -allows people to decide what arguments they want to enter
3. open opportunity – everyone can compete in the marketplace
4. private property rights
5. profit motive – force encourages people
6. voluntary exchange – people decide what/when to buy and sell
Consumer (Basic Roles)
1. Make Choices – purchasing power
2. Join Interest Groups – became powerful in the 1960s
Government (Basic Roles)
1. Protect Consumer
2. Protect Environment
3. Public disclosure laws – requries companies to provide full information about their products (ex: calories, labels, etc.)
4. Regulate businesses
The concerns of the public as a whole make up the:
public interest groups
Usual Length of the business cycle:
Lasts less than a year or for many years
Three main outcomes of public plicy aimed at economic stability:
1. Growth
2. Stability
3. Employment
Macroeconomics:
Study of behavior/decision making of entire economics
Business Cycle
A period of macroeconomic behavior/decision making of small units (individuals, businesses, families, and households)
Gross Domestic Product
Total value of all final goods/services produced in an economy
Technology
Always makes us stronger and more efficient
What is an example of something that self-interest would not motivate consumers to provide?
1. Libraries/parks/roads
2. Military, courts, judges, policemen
3. Schools
How does this factor relate to the individual/relate to society?
If total benefits to scoeity are greater than the cost, it should be a PUBLIC GOOD
Part of the economy involving transactions of individuals and businesses
Private Sector
Economic side effect of a good or service that generates benefits
Externality
Someone whow ould not choose to pay for a certain good or service, but who can still reap the benefits of it anyways if it is a public good
Free Rider
ex: Free parks, rutenberg
What is TANF?
“Temporary asistance to needy families”
Form of aid: Welfare
Recipients: Government gives states money
What is Social Security?
It helps the disabled, the retired, and the elderly
What is unemployment insurance?
Workers who are laid off or lose their jobs
Previous assistance (what is now TANF)
AFDC = “Aid to families with dependent children”
Federal forever kids, with dependency
In-kind benefits
Any good/service provided at a free or reduced cost
poverty threshold:
level of income which is needed to support your family or household

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