ECOS3003 Lecture Notes - Lecture 1: Coase Theorem, The Ultimate Resource, Nash Equilibrium
30 Jul 2018
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Document Summary
Centrally planned economy: an economic system in which government officials decide what to produce, how to produce it, and who obtains the final output. Pareto efficiency: a distribution of resources is p. e. if there is no alternative allocation that keeps all individuals at least as well off but makes at least one person better off. In theory, central planner can order a p. e. outcome in terms of production and distribution, i. e. any allocation of resources that could be achieved by the market can be achieved by a central planner. 2 aspects to ownership: use rights, i. e. renting, alienable rights, e. g. landlord can sell apartment but cannot use it while leased. Participants in the market will trade when it benefits them. Since each party can opt out, all trades will be mutually beneficial (at least weakly). Provided gains, trade will occur: all trades increase overall surplus, market mechanism: coordinates trade through prices; outcome p. e. (minimises costs of product, those who.
