Definitions

            THE ECONOMIC PROBLEM: How and Who makes the decisions. Who will receive the output/income? And perhaps 4. What should be a societies non-economic objectives? 5. Who makes economic decisions and by what process.
             SOCIAL CONTRACT: How we live together. A set of institutions formal and informal which we use in order to live together. FORMAL: police, fire dept., traffic lights. INFORMAL: drug dealers. 1066 was the most important year because the Normas invaded England at the battle of Hastings against the Angle Saxtons. This began the Social Contract.
             COMMAND VS MARKET ECONOMY: Command-one person or a set of persons(experts, highly trained, the elite) who will make informed and subtle decisions, or create systems that will. And so direct the economy, that is make the economic decisions. Market- each citizen gets and equal chance to vote ("the invisible hand") with their participation in the market (that is when they purchase goods and/or sell their services). The sum of the individual votes answer the three economic questions. There is no debate over what is valuable. We have all voted. BOOK- an economy that allocates resources primarily through the interaction of individuals (households) and private firms.
             Market Economy Command Economy.
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             US Europe France China now China.
             10 yrs. ago Ideal form.
             OPPORTUNITY COST: What you gave up to have a certain item. BOOK- the cost of a resource, measured by the value of the next best, alternative use of that resource.