Sunday, April 29, 2012

19 - Markets, Efficiency, and Price Signals

.Markets, Efficiency, and Price Signals - CrCo > .


1. Central planning is not efficient
2. Two types of efficiency:
a) Productive Efficiency- The idea that products are made at lowest costs.
b) Allocative Efficiency- State of economy in which production represents consumer's preference.
3. Central planners are less likely to be allocatively efficient because they have a harder time getting feedback about what people want.
4. Price Signals tells you what consumers are willing to by at higher prices.
5. Price gouging: When sellers sells essential items (e.g water, food etc) at much higher price than reasonable.
6. Below-Cost Pricing: This is also called Predatory Pricing. It's when a business drive out competitors by charging lower prices even at a short-term loss. Competitors that can't sustain such low prices will be forced out of the market giving the surviving businesses more market share and ability to raise prices.
7. I'm Batman!!

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