Notesale: Turn your study into money

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Unit 1

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It is more commonly
defined as the income of the 90th percentile divided by that of the 10th percentile

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(GDP) - A measure of the market value of the output of final goods and services in the
economy in a given period
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But it is insufficient, because many aspects of our
wellbeing are not related to what we can buy
GDP includes the goods and services produced by the government, such as schooling,
national defence, and law enforcement
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When sustained growth occurred, it began at different times in different countries,
leading to vast differences in living standards around the world
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Important new technologies were introduced in textiles, energy and
transportation//Industrial Revolution - A wave of technological advances and
organizational changes starting in Britain in the eighteenth century, which transformed a
craft-based economy into a commercial and industrial economy

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Technology is a process that takes a set of materials and other inputs—including the
work of people and machines—and creates an output
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Capitalism is an economic system characterized by a particular combination of
institutions
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by institutions, we mean the different sets of
laws and social customs regulating production and distribution in different ways in
families, private businesses, and government bodies
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In a capitalist economy, an important type of private property is the equipment,
buildings, and other durable inputs used in producing goods and services
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Capitalism – firms – markets – private property
Inputs and outputs are private property: The firm’s buildings, equipment, patents, and
other inputs into production
Firms use markets to sell outputs: The owners’ profits depend on markets in which
customers may willingly purchase the products at a price that will more than cover
production costs
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firms competing with each other in
markets had strong incentives to adopt and develop new and more productive
technologies, and to invest in capital goods that would have been beyond the reach of
small-scale family enterprises
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growth of firms employing large numbers of
workers—and the expansion of markets linking the entire world in a process of
exchange—allowed historically unprecedented specialization in the tasks and products

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comparative advantage - in the production of a particular good, if the cost of producing
an additional unit of that good relative to the cost of producing another good is lower than
another person or country’s cost to produce the same two goods
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10 – varieties of capitalism
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developmental state - A government that takes a leading role in promoting the
process of economic development through its public investments, subsidies of particular
industries, education and other public policies
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 dynamic economy—an economy bringing sustained growth in living standards
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One
set is economic; the other is political
 Where capitalism is less dynamic : Private property is not secure: There is weak

enforcement of the rule of law and of contracts, or expropriation either by
criminal elements or by government bodies
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 Firms are owned and managed by people who survive because of their connections
to government or their privileged birth: They did not become owners or
managers because they were good at delivering high-quality goods and
services at a competitive price
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 Combinations of failures of the three basic institutions of capitalism mean that
individuals and groups often have more to gain by spending time and
resources in lobbying, criminal activity, and other ways of shifting the
distribution of income in their favour

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