Equity and Efficiency

Equity and Efficiency - goods, to dispose of those items as...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Equity and Efficiency Efficiency is about  how to achieve goals, not what those goals should be What efficiency does address is the best way to achieve a goal once it has been   determined There is often a trade-off between equity and efficiency: policies that promote  efficiency often come at the cost of decreased efficiency, and policies that  promote efficiency often result in decreased equity A MARKET ECONOMY - When each and every market in the economy maximizes total surplus, then the  economy as a whole is efficient  - Just as it is impossible to make someone better off without making other people  worse off in a single market when it is efficient, it is impossible to improve upon  the outcome of a market economy when each and every market in that economy  is efficient Why Markets Typically Work So Well Property Rights Property rights - the rights of owners of valuable items, whether resources or 
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: goods, to dispose of those items as they choose Property rights are what make the mutually beneficial transactions in any market possible Economics Signal Economic signal- any piece of information that helps people make better economic decisions Prices are the most important signals in a market economy because they convey essential information about other peoples costs and their willingness to pay The market price signals to consumers with a willingness to pay equal to or more than the market price that they should buy the good, just as it signals to producers with a cost equal to or less than the market price that they should sell the good Since in equilibrium, the quantity demanded equals the quantity supplied, all willing consumers will find willing sellers Sometimes a price is not an accurate indicator of how desirable a good is...
View Full Document

Ask a homework question - tutors are online