This preview shows page 1. Sign up to view the full content.
Unformatted text preview: ate
could seek to produce all three commodities
independently, we can rest assured Nebraska
and Idaho will have a near impossible time
producing citrus fruit and the cost of doing so
would be exorbitant.
• Specialization allows us to use resources best
suited for each use in production and we
encounter considerable gains in output as a
result. Nebraska can specialize in producing
wheat, Idaho can specialize in producing
potatoes, and Florida can specialize in producing
oranges and each can trade with the other.
• The net effect of all this specialization and trade is
not only more productivity and total output, but
also a higher standard of living for all involved.
Specialization keeps costs lower and allows our
budget to have more buying power in the market. An additional critical component enabling efficiency in
market systems is the presence and use of money to
facilitate trade. A primary function of money is that it
serves as a medium of exchange. The use of money
as a medium of exchange contributes to efficiency in a
very important way because it allows an economy to
evolve beyond the need to barter, or trade one good
for another. The process...
View Full Document
This note was uploaded on 09/10/2009 for the course ECO 2251 taught by Professor Kirkland during the Spring '09 term at Troy.
- Spring '09