5 MOL! – I don’t need sleep…

Yesterday we defined a rational person to be someone who chooses what is best for herself given an objective, which is self-defined.

When we say best, we mean what the person believes to be best. It doesn’t matter what others think, or what society thinks, or what actually is best.

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5 MOL! – It’s all about me.

Before we proceed further, we want to clarify the definition of trade we used in last week’s posts. We chose to regard trade as synonymous with exchange, but in most economic texts you’ll find exchange being used in context of ‘trade between individuals’ whereas trade is reserved for ‘trade between countries’. It’s not a big difference in our opinion but we thought it is an important one to clarify.

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5 MOL! – Allocative Efficiency

If every point on the PPC is productive efficient, are all the points equally good?

ACOn the diagram, points B and C are productive efficient as all the resources are fully utilised. This doesn’t help answer the economic problem of what and how much to produce. Should the economy produce at point B, C or on some other point? Hence, another yardstick is required to measure the efficiency of the economy.

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