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Mega samenvatting Principles of economics
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Market failures and the role of policy: 12If markets fail to provide enough liquid means to make sure something important can be provided,
such as fire department. Therefore government needs to subsidise this with money achieved from
taxes.
Non exclusion: people cannot be excluded (national defense)
Non rivalry: one persons consumption cannot ruin it for others (park: 1 can use it today, you
tomorrow, can be shared)
If these two criteria are met, a private firm will not produce it.
Monetary policy: low interest rates, If more money is around, more money can be spent and inflation
will arise. `(Bank)
Fiscal policy: adjust spendings and taxes (Government)
GDP, business cycles, unemployment and the role of policy: 13 & 14
GDP is the market value of all finished goods and services within a country in a year. Intermediate
goods not counted. Egg does count for consumer, but not for bakery. Only markets, not love such as
animals (polar bears, tigers).
Nominal GDP: number of money goes up. (due to inflation)
Real GDP: if we actually do produce more/better goods and services.
Monetary policy to cut interest rate and boost aggregate demante, fiscal policy the same thing.
Education and training against structural unemployment. Subsidies. Lower minimum wage.
Globalization and economic inequality: 5.12-5.13, 18 & 19
Globalization can lead to people consuming more. Bad for the planet.
,Trilemma of Rodrik:
Economics of the environment and innovation: 20 & 21 (excl. 20.4 and 20.8, 21.2 and 21.5)
Stabilizing emission doesn’t work, since this will still harm the environment.
MRS = MRT (best point to base policy on, tangent).
MRS: consumption divided by environmental = value of environment
MRT: increase environment divided by increase of consumption. = cost of abatement
Abatement policies: innovation, choose to consume less, banning or capping
Marginal utility: how much of an item are consumers willing to purchase.
Private property, property rights: 1 (As a source of market failure)
Tangible/intangible an individual owns.
, 4 rights: usability, earn income, transfer good to others, destroy it.
When somebody owns something, care is being taken of it. (air, sea?)
Property rights cant be efficiently distributed, it costs a lot to do it for the government, who gets the
right? (inequity issues).
Social dilemma, free rider problem: 4
If too many people are free riders, no one will benefit and even loss can occur.
Incomplete contracts and asymmetric information: 6 (As a source of market failure)
If not everything cant be specified in a contract important for the economic relationship.
Control rights are important within these contracts. `
Not everything can be foreseen.
Low competition/monopoly/economies of scale: 7 (As a source of market failure)
low competition -> monopoly (price inelastic). Price well above marginal costs. Steep curve.
Punishment for monopolies.
Knowledge intensive goods have high first copy costs, but low marginal cost. -> price setter market.
Supply – demand framework in competitive markets: 8
Pareto efficient; when one cannot get better without another one losing. This is the case in a
competitive equilibrium.
(external spillover effects, the absence of markets for environmental goods; knowledge as a public
good)
Impact of something in one nation can have on the other nation. Oil prises rising impact car
industries in other nations.
Lacking of safeguards against fraud in environmental goods (water, forest, grasslands.)
Price cannot be determined (no equilibrium), because no one knows the quantity.
Buyers are only aware of a miniscule portion of the entire range of services a ecosystem can offer.
Prices essentially demand termined since nature will continue with its provision of ecosystem goods.
Unemployment due to incomplete contracts, reservation wage: 6
Credit constrained households, marginal propensity to consume
Net export and foreign trade
Limits of GDP and economic growth (innovation, sustainability).
Comparative advantage and specialization: 1
GDP, income and disposable income: 1
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