EC 200-B01

*** EXAM TMW ***

Adam Smith

if you seek your own self-interest, you will enhance the public interest (the invisible hand)

sets up incentive both for production consumption of the product (EMC v. EMB)

S/D graph sample, no data entered

price system sends out “the right signals”

economic growth
free markets create market growth

division of labor limited by market size


  • decision-making problems
  • utility maximizing decision (people seek to maximize their own)
  • one-shot prisoner’s dilemma ($99/$1)
  • video store: law of diminishing marginal utility
  • to engage in econ reasoning: consider cost v benefit
  • advocates of Laissez-faire believe that mkt works best when people look out for each other? F
  • sunk costs
  • everything has opp costs
  • S/D axis
  • efficient mkt theory of stock mkt pricing: everything available to know is known and reflected in stock price
  • why is the OTE theory necessary to study markets? there must be a baseline
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