Summary
Summary unit 6
- Course
- ECO1010F
- Institution
- University Of Cape Town (UCT)
A summary of notes and lecture examples made on iPad.
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, Firmsthe
* major actors in
economy
Employs people
purchases inputs to produce goods
+ services for the market
>
-
Sets prices greater than the cost of production
(profits
&
v ision
of labour
>
specialization of producers
fIRMS =
power is concentrated the of to different
in hands
owners/managers carry our
and allows them to tasks production
issue commands to workers
. during
MARKETS
:
power is decentralized ,
so buyers and sellers decisions
are autonomous and voluntary .
STRUCTURE Of FIRM
* The owners (Board of directors)
decide the
long-term strategies managers
-
and oversee the
who decisions
.
implement
⑪ Managers
in
charge of workers
-
tasks to the
assign workers
~
⑪ Flows of information
& workers know things that managers do not .
* do
managers know things that owners not
*
Asymmetric information between employes +
employees .
C he person
* in exchange knows more than the other
, Contracts
& in which an commands
oneway employer can issue
* a contract is a
legal documunfunderstanding that specifies a set of actions that parties
to the contract must undertake .
& sale contract rent contract
Contracts
for products sold in the market
permanently transfer ownership
of the
good from the seller to the
buyer .
Contracts
for labour
(generally brokered in
firms) temporarily transfer authority over a
persons
=>
activities from employer to (owner
manager .
FIRM SPECIFIC ASSETS
Markets
=
shop around Firms =
relationships extend over
interactions
long period of
are short
Itemporary time
=
a
=
not
often repeated
V
working
in
firms allows
you
to acquire a network of
and
colleagues associates
who are essential for the
job .
Managers and
employees
also acquire
social
technical and skills
specific
do
V
to the work
they .
firm specific assets (skills ,
networks +
friendships)
· More value in current firm than in next
best alternative
· once relationship ends the value is lost on both sides
,
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