But going to court to enforce a contract or private property rights will be

But going to court to enforce a contract or private

This preview shows page 14 - 15 out of 15 pages.

But going to court to enforce a contract or private property rights will be successful only if the court system is independent and judges are able to make impartial decisions on the basis of the law. In the United States and other high-income countries, the court systems have enough independence from other parts of the government and enough protection from intimidation by outside forces-such as criminal gangs- that they are able to make their decisions based on the law. In many developing
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countries, the court systems lack this independence and will not provide a remedy if the government violates private property rights or if a person with powerful political connection decides to violate a business contract. If property rights are not well enforced, fewer goods and services will be produced. This reduces economic efficiency, leaving the economy inside its production possibilities frontier. Conclusion We have seen that trading in markets, people are able to specialize and pursue their comparative advantage. Trading on the basis of comparative advantage makes all participants in trade better off. The key role of markets is to facilitate trade. In fact, the market system is a very effective means of coordinating the decisions of millions of consumers, workers and firms. At the center of the market system is the consumer. To be successful, firms must respond to the desires of consumers. These desires are communicated to firms through prices. To explore how markets work, we must study the behavior of consumers and firms. We continue this exploration of markets in Chapter 3 when we develop the model of demand and supply.
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