ECON 1000 Lecture Notes - Lecture 12: Walmart, Comparative Advantage, W. M. Keck Observatory

• School: York University
• Department: Economics
• Course: ECON 1000
• Professor: Xianghong Li

Document Summary

People gain by specializing in the production of those goods and services in which they have a comparative advantage and then trading with each other. But for billions of individuals to specialize and produce millions of different goods and services, their choices must somehow be coordinated. Two competing economic coordination systems have been used: central economic planning and decentralized markets. Central economic planning was tried in russia and china and is still used in cuba and. This system works badly because government economic planners don"t know people"s production possibilities and preferences. Resources get wasted, production ends up inside the ppf, and the wrong things get produced. Decentralized coordination works best but to do so it needs four complementary social institutions. A firm is an economic unit that hires factors of production and organizes those factors to produce and sell goods and services. Examples of firms are your local gas station, wal-mart, and general motors.