ECON101 Chapter Notes - Chapter 5: Marginal Cost, Social Cost, Competitive Equilibrium

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Liton Chakraborty

Document Summary

The people who are willing and able to pay the market price get the resource. Two kinds of people decide not to pay market price: those who can afford to pay but choose not to buy, those who cant afford to pay, command. Allocates resources by the command of someone in authority. You have a job, your boss tells you what to do. He is allocating your labour resources to a certain task. Works badly when range of activity is too large and when it is easy for people to fool those in authority: majority rule. Works well when decisions being made affect large numbers of people and self interest must be suppressed: contest. Contest allocates resources to a winner: first come, first served. Allocates resources to those who are first in line. Works best when a scarce resource can serve just one user at a time: lottery. Lotteries, jackpots, casions, landing slots to airlines, races, fishing rights.