Economics 1021A/B Chapter Notes - Chapter 5: Allocative Efficiency, Demand Curve, Economic Surplus

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Jeannie Gillmore

Document Summary

Allocating can be performed in several ways resources are scarce, so they must be allocated: market price. A command system allocates resources by order of someone in authority the command system is used extensively inside firms and government departments. Works well in organizations in which the lines of authority and responsibility are clear and it is easy to monitory the activities being performed: majority rule. Majority rule allocates resources in a way that a majority of voters choose. Societies use majority rule to elect representative governments that make economic decisions. Works well when the decisions being made affect large numbers of people and self-interest must be suppressed to use resources most effectively: contest. A contest allocates resources to a winner (or a group of winners) Contests do a good job when the efforts of the players are hard to monitor and reward directly.