Elasticity… … is a measure of how much buyers and sellers respond to changes in market conditions … allows us to analyze supply and demand with greater precision
Interdependence and Trade Consider your typical day: – You wake up to a alarm clock made in Wenzhou – You put on some clothes made of cotton grown in Xinjiang and sewn in factories in Fujian Province
The Theory of Consumer Choice The theory of consumer choice addresses the following questions: – Do all demand curves slope downward? – How do wages affect labor supply? – How do interest rates affect household saving?
“In this world nothing is certain but death and taxes.” . . . Benjamin Franklin 0 20 40 60 80 100 1789 Taxes paid in Ben Franklin’s time accounted for 5 percent of the average American’s income
Efficiency v. Equity – Efficiency means society gets the most that it can from its scarce resources. – Equity means the benefits of those resources are distributed fairly among the members of society