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Unit 2: Responsiveness and the Value of Markets

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    The degree to which individuals or firms, or any economic agent, respond to incentives is important to ascertain for pricing and policy purposes: If prices change, to what degree will suppliers and buyers respond? How will markets respond to taxes? Chapter 4 explores and develops the concept of elasticity, which is the word economists use to define responsiveness. A meaningful metric, one formulated in percentage terms, that is applicable to virtually any market or incentive means that behaviours can be compared in different environments.

    In Chapter 5 we explore how markets allocate resources and how the well-being of society's members is impacted by uncontrolled and controlled markets. A central theme of this chapter is that markets are very useful environments, but, if they are to serve the social interest, need to be controlled in many circumstances.


    This page titled Unit 2: Responsiveness and the Value of Markets is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Douglas Curtis and Ian Irvine (Lyryx) via source content that was edited to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.