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MGMT 1040 (37)


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MGMT 1040
William(bill) Woof

Determine the Economic Outcomes • Economic outcomes refers to the net balance of benefits over the costs for the full society, given that the values of those benefits and costs are determined by all of the people within that full society. • Pareto Optimality: refers to a condition in which the scarce resources of society are being used so efficiently by the producing firms, and the goods and services are being distributed so effectively by the competitive markets, that it would be impossible to make any single person better off without harming some other person. Its concept of maximum social benefit at minimal social cost provides the ethical content of economic theory. • Example- CompanyABC minimizes operating costs by lowering wages, have their goods manufactured in China (cheap labour) to keep their costs of factors of production as low as possible. Then companyABC sells their output goods and services at the highest possible prices. • Competition in the output product markets keeps the prices from becoming improperly high • Competition in the input factor markets keeps the costs from becoming unfairly low • Economic outcomes can also be expressed as three dictums… (1)- More is better than less (2)- Specifically, more is better than less when that “more” consists of what people really want, as expressed through their preference sin the product markets (3)-And even more specifically, that more of what people really want is better than less when that “more” is produced as efficiently as possible by using as little as possible of what people least want, as expressed by their preferences in the factor markets • Pareto Optimality is consider
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