ECON 1000 Chapter Notes - Chapter 5: Market Failure, Overproduction, Competitive Equilibrium
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ECON 1000 Full Course Notes
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Resources are scarce, so they must be allocated somehow. Trading in markets is just one of the several alternative methods. Resources might be allocated by: market price. When a market price allocates a scarce resource, the people who are willing and able to pay that price get the resource. Two kinds of people decide not to pay the market price: those who can afford to pay but choose not to buy and those who are too poor and simply cannot afford to buy: command. A commend system allocates resources by the order of someone in authority. In the canadian economy, the command system is used extensively inside firms and government departments. A command system works well in organizations in which the lines the lines of authority and responsibility is clear and it is easy to monitor the activities being performed: majority rule. Majority rule allocates resources in the way that a majority of voters choose.