ECO105Y1 Lecture Notes - Lecture 4: Invisible Hand, Market Power, Comparative Statics
Document Summary
A market is not a place ( physical or virtual ) or a thing. It is a process - the interactions between buyers and sellers. A negotiation between a buyer and a seller that results in a exchange. Markets are an unlikely mix of competition and cooperation. Sellers compete with each other for customers. Voluntary exchange is essentially cooperative, and both sides win. Through laws, government must de ne and protect property rights and enforce contracts between buyers and sellers. Property rights are rules that ensure that when you own something, no one can take it away from you by force. Without property rights, there would be no incentives to produce anything for exchange. Property rights are a prerequisite for anything to be produced, government must also enforce agreements between buyers and sellers. Part of the reason ebay has been successful is that it has implemented rules that promote the necessary trust.
