4 Fundamental Choices that Every People has to Make as a Result of Scarcity: What goods and services to produce?

? How much goods and services to produce? How should the goods and services be produced? For whom should the goods and services be produced? 2 Assumptions in Yano (Economy): Fully developed Efficient Production Possibilities Curve - represents the points at which an economy is efficiently producing its goods. Therefore, allocating its resources in the best way possible. - Shows there are limits to production, so an economy, to achieve efficiency, must decide what combination of goods and services can be produced. Market- place of interaction of buyers and sellers Perfect Competition Large no. of sellers and buyers Homogeneous buyer Free entry free exit Buyers and sellers have perfect knowledge about the market Sellers control the price No example Pure Monopoly One seller, many buyer Unique product; no ads Entry is blocked because of govt regulations Natural Monopoly- type of pure monopoly Pure Monopsony Opposite of pure monopoly Many sellers, one buyer Monopolistic Many sellers, many buyer Differentiated products Other seller free to enter market Each seller influence prices EXAMPLE: all store in the community Oligopoly Few sellers, many buyers Differentiated/ identical Other sellers are free to enter the market but regulated Conjectural interdependence (-cartel) (-collusion) EXAMPLE: OPEC (Organization of Petroleum Exporting Company)