Economics 1021A/B Chapter Notes - Chapter 5: Externality, Social Cost, Marginal Cost

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Mc Hugh Rivers

Document Summary

Resources go to those most willing and able to pay. Allocates resources to a winner or a group of winners. People with the (cid:532)right(cid:533) characteristics get the resources; discrimination. When there"s no effective way to distinguish among potential users of a scarce resource. Command system allocates resources by order of authority. If you have a job and a boss, your labour is allocated to specific tasks by a command. Resources are allocated efficiently and in social interest when they are used in ways that ppl value most highly. Allocated efficiency: point on ppf at which marginal benefit = marginal cost. Value is what consumers are willing to pay; price is what consumers actually pay. Demand curve is a marginal benefit curve. Marginal benefit = value of one more unit of a good or service = maximum willing to pay for an additional unit.