lecture_1_tab - ECOS3003 Lecture 1 1 Markets, organisations...

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ECOS3003 Lecture 1 1
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ECOS3003 Lecture 1 2 Markets, organisations and the role of the market The market: what? How? For whom? Market mechanism determines much economic activity – but activity within the firm largely centrally planned. Questions: - how do market systems work? - what are the relative advantages of market systems cf centrally planning? - why do we observe so much eco. activity conducted within firms in a market economy Note: decision to centralise at country level similar to decision at the firm level (costs and benefits of central planning over market).
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ECOS3003 Lecture 1 3 Pareto efficiency – a distribution of resources is P.E. if there is no alternative allocation that keeps all individuals at least as well off but makes at least one person better off - in theory central planner can order a P.E. outcome in terms of production & distribution; that is, any allocation of resources that could be achieved by the market can be achieved by a central planner? Do you think this will happen? (Now – discuss market outcome; how it is PE; then argue why large economy outcome of market better than centralised planning)
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ECOS3003 Lecture 1 4 Property rights and exchange market economy Property rights – legally enforced right to select uses of an economic good - private property right when it is assigned to a specific person - private property rights alienable as it can be transferred (sold) to another person (cf centrally planned – govt owns property) 2 aspects to ownership - use rights (ie renting) - alienable rights (landlord can sell apartment but can use it while leased)
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ECOS3003 Lecture 1 5 Trade – participants in market trade when it benefits them - because eash aprty can opt out all trades will be mutually beneficial (at least weakly) - provided gains, trade will occur - all trades increase overall surplus - trade ceases when no longer mutually beneficial to buy & sell - ie when Pareto efficient, trade ceases; hence market outcome is P.E. (Note gains from trade from exchange and specialisation)
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This note was uploaded on 08/24/2010 for the course ECOS 3003 taught by Professor Andrewwait during the One '10 term at University of Sydney.

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lecture_1_tab - ECOS3003 Lecture 1 1 Markets, organisations...

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