Answered: A __________ system is a method of…

A __________ system is a method of making economic decisions that allows individuals and firms to decide who gets what and how using a voluntary exchange.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter2: The One Lesson Of Business

Section: Chapter Questions

Problem 2MC

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An alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. When a unit of a good is sold, that means the value the seller places on the good is lower than the value the buyer places on the good. After the sale has taken place, the ownership of the good has been transferred from a person who has a low value to a person with a high value. This is called a reallocation from low to high valued use. Sometimes this reallocation involves a physical movement of the good rather than a transfer of legal ownership. The good is transported from an area where the price of the good is low to an area where the price of the good is higher. This is also called a reallocation from…
An alternative way of thinking about the forces that cause markets to equlibrate in the real world is to think of markets reallocating the good from low to high valued use. Or to think of how the action of buyers and sellers engaging in mutually beneficial voluntary exchange (market forces) reallocates legal ownership or the physical location of the good from low to high valued used. When a unit of a good is sold, that means the value the seller places on the good is lower than the value the buyer places on the good. After the sale has taken place, the ownership of the good has been transferred from a person who has a low value to a person with a high value. This is called a reallocation from low to high valued use. Sometimes this reallocation involves a physical movement of the good rather than a transfer of legal ownership. The good is transported from an area where the price of the good is low to an area where the price of the good is higher. This is also called a reallocation from…