Notes from “Basic Economics” by Thomas Sowell
Part I: Prices and markets
Notes
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Law of supply and law of demand
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Law of supply: The quantity supplied varies directly with the price.
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Law of demand: The quantity demanded varies inversely with the price.
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In other words, people tend to buy more at lower prices and less at higher prices. Producers tend to supply more at higher prices and less and lower prices.
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Shortage v/s surplus
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Shortage: Prices rise because the amount demanded exceeds the amount supplied at existing prices.
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Surplus: Prices fall because the amount supplied exceeds the amount demanded at existing prices.
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Scarcity and competition
Quoting directly from the book -
Scarcity means that everyone’s desires cannot be satisfied completely, regardless of which particular economic system or government policy we choose—and regardless of whether an individual or a society is poor or prosperous, wise or foolish, noble or ignoble.
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Is having an economy optional?
Competition among people for scarce resources is inherent. It is not a question whether we like or dislike competition. Scarcity means that we do not have the option to choose whether or not to have an economy in which people compete.
That is the only kind of economy that is possible—and our only choice is among the particular methods that can be used for that competition (free-market economy, communist economy and so forth).