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Economics: Microeconomics- Chapter 5 Efficiency and Equity summary
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Efficiency and EquityChapter 5
Economics 3ed: Global and Southern African Perspectives © 2020 1
,Main ideas
After studying this chapter, you will be able to:
• Describe the alternative methods of allocating scarce resources
• Explain the connection between demand and marginal benefit and
define consumer surplus; and explain the connection between
supply and marginal cost and define producer surplus
• Explain the conditions under which markets are efficient and
inefficient Explain the main ideas about fairness and evaluate claims
that markets result in unfair outcomes
Economics 3ed: Global and Southern African Perspectives © 2020 2
, Resource Allocation Methods
Market Price
When a market price allocates a scarce resource, the people who are willing and able to
pay that price get the resource
Command
A command system allocates resources by the order (command) of someone in
authority
Majority Rule
Majority rule allocates resources in the way that a majority of voters choose
Contest
A contest allocates resources to a winner (or a group of winners)
First-Come, First-Served
A first-come, first-served method allocates resources to those who are first in line
Economics 3ed: Global and Southern African Perspectives © 2020 3
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