Efficiency
Scarcity, economizing and efficiency A technical look at efficiency Efficiency and values An economists look at efficiency Trade I want to live alone - in peace without pipple!!! Is trade "productive"? Goods Are scarce (more is preferred to less) Subjective - John Tesh CD's are a bad to me but not to everyone. vs. bads (people prefer less to more) Does trade create wealth? Wealth def. "Production" consists of activities that produce wealth - not just things. Equal values? ProductionPossibilities Assumptions Society's menu of choices in a 2 good world Uses Cost Efficiency Increasing costs Economic growth Present vs. future consumption Degenerate brothers Specialization and Trade with Comparative Advantage Specialization - following one's comparative advantage Finding one's comparative advantage Market process provide information But transaction costs exist! The costs of arranging cotracts and agreements among interested parties. E.g.: Relative price guide people to their comparative advantage Singing opera is my comparative advantage Absolute vs. comparative advantage Determining comparative advantage in a two-good world |
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Determining the trading ration that will benefit both parties Showing the wealth Middlemen A type of comparative advantage Cause markets to work more efficiently Stockbrokers, employment placement agencies, real estate brokers - brokers generally. They reduce transaction costs - selling stock, a house, or finding a job. Rules of the Game that encourage specialization and trade are essential. On Efficiency and Values When property rights are clear and established, markets determine the values of inputs and outputs. Disputes about efficiency are normally disputes about the value of things. What is the "real value" of open space in Irvine? Who has the right to decide?