Waste doesn’t exist within the natural world — every output of a system acts as an input for another. Material lifecycles within nature are circular, not linear. And though waste doesn’t exist within the natural world, it most certainly — at a highly accelerated rate — exists within the human world. Populations and the demand for resources continue to surge, and the rate at which materials and products are purchased and disposed of increases as well.

A wonderful thing about free markets and competition in the economy is that output is produced at the lowest possible cost. This fact is extremely important because it means that free markets are as economically efficient as possible at converting resources into the goods and services that people want to buy.In addition, markets save society a lot of money because they produce efficiently without requiring human intervention.

For simplicity, economists often assume that people are fully informed and totally rational when they make decisions. You may think that gives people way too much credit, but economic models based on those assumptions work surprisingly well much of the time.However, in the real world, people aren’t always informed about the economic decisions they need to make, and they aren’t always as reasonable as economists assume.

When the economy encounters a negative demand shock, price flexibility (or lack of flexibility) determines both the severity and length of any recession that may result. If prices were infinitely flexible — if they could change within seconds or minutes after a shock — the economy would immediately move from Point A to Point C, and all would be right with the world.

Offering “free” healthcare, reduced-cost care, and health insurance all have drawbacks for the economy. However, Singapore has managed to create a set of medical institutions that delivers world-class healthcare while somehow spending 50 percent less than Canada and 70 percent less than the United States. Keep reading to find out their economic secret.

The worldwide Great Recession of 2007 to 2009 began in the economy when a housing bubble in the United States popped in 2006. Trillions of dollars had been invested in the financial markets on the premise that residential housing prices would never decline significantly.As the bubble burst and home prices began to plummet, the economy took a hit as dozens of large banks as well as many hundreds of financial firms were threatened with bankruptcy.

In the United States, the economy is relatively stable and prices rise only a small amount each year. However, even moderate inflation causes problems by cutting into the practical benefits of using money instead of barter. You can get a better sense of this fact by looking at the four functions that economists generally ascribe to money and the ways in which inflation screws up each of them: Money is a store of value.

An important economic problem that results from poorly defined property rights that don’t take account of negative externalities is called the Tragedy of the Commons. Here, you examine this problem in detail. The economic problem: Overgrazing on a commonly owned field The Tragedy of the Commons refers to a resource being overexploited due to the perverse incentives created by common ownership.