Complete Course Notes

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1 052909 - BUSINESS & INDUSTRIAL ECONOMICS (GRILLI LUCA) 24/02 Efficiency, coordination and economic organization “Economic organizations are created -entities within and through which people interact to reach their goals ” -Milgrom and Roberts. This definition is sufficiently general to embrace what is commonly intended with an economic organization, but we like it because it contains some elements which are hidden and conceal which is nevertheless make it more visible and apparent. The first el ement is that economic organization are instruments, they are created entities, they are humanly device tool to reach some goals . With goals we intend economic goals, the satisfaction of economic needs in term of consumption of goods and services. It is implicitly said that all economic agents that set up these organization should know what is best for them, and what they like the most (they should have a precise order of preferences). The other element which is important to stress is the fact that all ec onomic organization make sense in the real world because we live in a world of scarcity of resources, scarcity of both input and goods to be produced. If everything was clearly available we would not need any economic organization to satisfy our economic n eed. With scarcity, we mean a within individual scarcity and also scarcity between individual . Ex if I want to consume something more, given my income, I have to give up something else. Or we can say that the increase of our utility, level of satisfaction, may come at the expense of another individual. This is the between component of scarcity. We may identify the most important economic organization which we will encounter. The whole economic system is an economic organization which can be divided in different layers…