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What Is Economic Geography? - What Are Its Roots, and To What Is It Related?
What Is Economic Geography? - What Are Its Roots, and To What Is It Related?
What is economic geography? What are its roots, and to what is it related?
Geographic Perspectives Economic Geography of the World Economy Globalization Four Major Questions of the World Economy World Development Problems Political Economies Geographical Information Systems
FIRMS Produce and sell goods and services Hire and use factors of production
HOUSEHOLDS Buy and consume goods and services Own and sell factors of production
Labour, land, MARKETS and capital FOR FACTORS OF PRODUCTION Households sell Firms buy Income = Flow of inputs and outputs = Flow of dollars
Households
Buy and consume goods and services Own and sell factors of production
Markets for Goods and Services Markets for Goods and Services
Firms sell Firms sell Households buy Households buy Households sell Households sell Firms buy Firms buy Inputs used to produce goods and services Inputs used to produce goods and services Land, labour, and capital Land, labour, and capital
Supply-Demand Equilibrium
Price Equilibrium QD = Q s S The supply curve has a positive slope because marginal cost rises as quantity increases
P* The demand curve has a negative slope because the marginal value falls as quantity increases Quantity per period
Q*
Consumer Choice
Consumer choice theory is based on the notion that consumers do the best they can, given the limitations dictated by their incomes and consumer prices.
Utility Maximization
The consumers decision-making process has two steps:
1. Figure out the menu options, or alternative combination of two goods (books and movies). 2. Pick the combination of goods that generates the highest level of satisfaction or utility.
PRODUCTION
Supply and demand are the two words that economists use most often. Supply and demand are the forces that make market economies work. Economics in the micro context is about supply, demand, and market equilibrium.
PRODUCTION
According to the Law of Supply: Supply
Firms are willing to produce and sell a greater quantity of a good when the price of the good is high. This results in a supply curve that slopes upward. The Firms Objective
The economic goal of the firm is to maximize profits.
Simple profit function Profit = f(revenue or sales, costs of production, transportation costs) Revenue location factors Production cost location factors Transportation cost location factors Economies of scale
Markets
In a market economy, people exchange things, trading what they have for what they want. Although it appears that markets arose naturally, a number of social inventions, such as contracts, insurance, patents, and accounting rules, have made them work better.
Virtues of Markets
In a centrally planned economy, a planning authority decides what products to produce, how to produce them, and who gets them. Under a market system, prices provide individuals the information they need to make decisions. Prices provide signals about the relative scarcity of a product.
Virtues of Markets
The decisions made in markets result from the interactions of millions of people, each motivated by their own interests. Adam Smith used the metaphor of the invisible hand to explain that people acting in self-interest may actually promote the interest of society as a whole.
Shortcomings of Markets
Market failure is what happens when markets fail to produce the most efficient outcomes on their own. The role of government is to correct this problem. Market failure can also occur when buyers and sellers have imperfect information about the quality of goods and services they are exchanging.
market failure. Enforcing property rights and protecting private property in order to facilitate production and exchange. Establishing and enforcing rules for exchange in markets. Reducing economic uncertainty, and providing for people who are unlucky.