6. Markets are usually a good way to organize economic activity In a market economy, households decide what to buy and who to work for。 Firms decide who to hire and what to produce
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 6. Markets are usually a good way to organize economic activity. In a market economy, households decide what to buy and who to work for. Firms decide who to hire and what to produce
6. Markets are usually a good way to organize economic activity Adam smith made the observation that households and firms interacting in markets act as if guided by an invisible hand. 5
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 6. Markets are usually a good way to organize economic activity. Adam Smith made the observation that households and firms interacting in markets act as if guided by an “invisible hand
6. Markets are usually a good way to organize economIc activity o Because households and firms look at prices when deciding what to buy and sell, they unknowingly take into account the social costs of their actions As a result, prices guide decision makers to reach outcomes that tend to maximize the welfare of society as a whole
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 6. Markets are usually a good way to organize economic activity. Because households and firms look at prices when deciding what to buy and sell, they unknowingly take into account the social costs of their actions. As a result, prices guide decision makers to reach outcomes that tend to maximize the welfare of society as a whole
7 Governments can sometimes improve market outcomes When the market fails(breaks down) government can intervene to promote efficiency and equity
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 7. Governments can sometimes improve market outcomes. When the market fails (breaks down) government can intervene to promote efficiency and equity
7 Governments can sometimes improve market outcomes Market failure occurs when the market fails to allocate resources efficiently
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. 7. Governments can sometimes improve market outcomes. Market failure occurs when the market fails to allocate resources efficiently