SMG SM 131 Lecture Notes - Lecture 3: Free Rider Problem, Pareto Efficiency, Marginal Cost

• School: Boston University
• Department: School of Management
• Course: SMG SM 131
• Professor: Rebecca Nichols

Document Summary

Markets- social constructs based on institutions (laws, legal system, political institutions: goods market, services market, labor market, financial market. Market economy- based on private property, individuals decide how, what, and who: gov"t must allocate and defend private property rights. Rewards/payments, concept of fairness- how much you get depends on how much produces you give. Price- total revenue- costs, how we coordinate transitions. Other systems: socialism- if individuals inherent goodness doesn"t make them consider general good, gov"t will make them. Central planning/ command economy- gov"t planning sets society"s goals and directs ppl on how to achieve them: capitalism- based on market ownership of means or production, resides with small group of individuals- capitalists. 3 sectors us economy: households- factor market- supply labor to business and business pay them, businesses- goods market- business produce g/s and sell to households, gov"t. Business- private producing units, group ppl organized together to accomplish some end.