(3) How Economists Think and Analyze II: Role of Markets
Markets and Exchange, Specialization, Division of Labor, Mutual Gains from Exchange, Competition
This provides an overview of the role of markets in an economy. It explains the concepts of specializaton and mutual gains from exchange. It discusses market exchange between self-interested maximizers with differing interests. It describes how competition constrains self-interested behavior.
Crane, Steven E., "(3) How Economists Think and Analyze II: Role of Markets" (2011). Principles of Microeconomics. Paper 65.
Ability to describe the broad function of markets in an economy. Ability to explain how specializaiton can provide the possibility for mutual gains from exchange. Ability to explain how there can be mutual gains from exchange in a market transaction, and the role of competition as a constraint on self-interested behavior.
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