ECN 104 Lecture Notes - Lecture 2: Consumer Sovereignty, Barter, Market System
19 Oct 2016
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Set of institutional arrangements & a coordinating mechanism for producing goods. Econ. decisions made by a central gov body. The coordination problem: difficult for central planners to co-ordinate millions of individual decisions by consumers, resource supplies, & businesses. Outputs of some industries serve as inputs to others. If steel producers don"t make the right amount of steel, there will be shortages or surpluses. Three special merits: promote efficiency in the allocation of resources, provide incentives for people to be productive through work effort and acquiring skills, provide personal freedom in making economic decisions. Owner can enjoy it, dispose of it as one sees fit. Business can buy & sell as they choose. Owners can use/sell property as they choose. What interest you, what you think is best. Independently acting buyers/sellers: no single buyer/producer controls the market. Institution/mechanism that brings together buyers & sellers. Prices signal scarcity & guide resource allocation.
