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LEGAL CLAIM: Ownership of the physical goods, services, and resources that make up the real side of the economy. Legal claims are a key feature of the paper, or financial side of the economy. Transferring legal claims is the primary method of diverting income from household saving to investment and government borrowing. Legal-claim buyers loan income and legal-claim sellers borrower income.
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Lesson 22: Factor Supply | Unit 1: Background
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Page: 6 of 25
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In this unit, you should have learned about:- The notion of factor supply, which involves the quantity of productive resources that are offered for sale at different factor prices.
- The four basic factor payments -- wage, interest, rent, and profit -- used to compensate factors of production for their productive services.
- The four basic factors of production that are supplied by their owners -- labor, capital, land, and entrepreneurship.
- Factor markets, which combine factor supply and factor demand.
- That factor markets are used to exchange the services of the four resources.
- The role factor markets play in the overall economy as seen through the circular flow.
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ADVERSE SELECTION An inefficient, bad, or adverse outcome of a market exchange that results because buyers and/or sellers make decisions based on asymmetric information. This commonly results in a market that exchanges a lesser quality good, what is termed the market for lemons. Two related problems resulting from asymmetric information are moral hazard and the principal-agent problem. Two methods of lessoning the problem of adverse selection are signalling and screening.
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PURPLE SMARPHIN
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Today, you are likely to spend a great deal of time wandering around the downtown area hoping to buy either a large, stuffed kitty cat or a cross-cut paper shredder. Be on the lookout for spoiled cheese hiding under your bed hatching conspiracies against humanity.
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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"Don't be distracted by criticism. Remember the only taste of success some people have is when they take a bite out of you." -- Zig Ziglar
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