note1 - ch5

note1 - ch5 - Econ 251 Fall 2009 Handout 7 09/15/00 Chapter...

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Econ 251 Fall 2009 Handout 7 09/15/00 1 Chapter 5 – Efficiency and Equity I. Resource allocation methods Resources are ______________ and so they must be allocated somehow. There are several methods through which resources can be allocated to uses: 1. ____________________ : when the market price allocates a scarce resource, the people who are willing and able to pay that price get the resource. Ex: 2. ___________________ : resources are allocated by the command of someone in authority Ex: 3. ___________________ : resources are allocated in the way that a majority of voters choose. It works best when the decisions affect a large number of people . Ex: 4. __________ : allocates resources to a winner. It works best when the efforts of the “players” are hard to monitor and reward directly. 5. ___________________ 6. _______________ : allocates resources randomly. It works best when there is no effective way to distinguish among potential users of a scarce resource. 7. __________________ 8. _________ We will focus our attention only on the first method of allocating resources – market prices. Question of interest : ________________________________________________________? Recall from Chapter 2: s Allocative efficiency is achieved when ______________________________________ ______________________ valued. s
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note1 - ch5 - Econ 251 Fall 2009 Handout 7 09/15/00 Chapter...

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