SOSC 4043 Chapter Notes -Corporate Law, Takeover, Market Power
13 Dec 2013
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The nature of the firm (by: r. h. coase) Economic theory has suffered in the past from a failure to state clearly its assumptions, omitting the examination of the foundations on which it was created, which are necessary to prevent misunderstanding. Description of the economic system given by sir arthur salter: the normal economic system works itself. Its current operation is under no central control: over the whole range of human activity and human need, supply is adjusted to demand, and production to consumption, by a process that is automatic, elastic and responsive. This theory assumes that this direction of resources is dependent directly on the price mechanism. Salter"s description is incomplete picture when you think within a firm. In economic theory, allocation of factors of production between different uses is determined by the price mechanism. Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market.
