funbus

- is an entity that employs resources, or factors of production, to produce goods and services to be sold to consumers, other firms, or the government.

guides individuals from production of one good into the production of another; coordinates individuals’ actions so that suppliers and demanders find mutual satisfaction at equilibrium.

• Market

• Firm

coordinates individuals’ actions so that suppliers and demanders find mutual satisfaction at equilibrium.

• Market

• Firm

observed that individuals in market setting are “led by an invisible hand to promote an end which is no part of their intention”.

Economist Adam Smith - observed that individuals in market setting are “led by an ____ hand to promote an end which is no part of their intention”.

- has visible hands in a firm; tells employees to

1) produce more goods.

2) design new goods

is both led by the invisible hand of the market and the visible hand of the firm’s manager. Market coordination and managerial coordination are both present.

• Individual’s action

• Market coordination

– is the process in which individuals perform tasks, such as producing certain quantities of goods, based on changes in market forces such as supply, demand, and price

• Market coordination

• Individual’s action

refers to the process in which managers direct employees to perform certain tasks

• Managerial coordination

• Individual’s action

• Market coordination

- suggest that firms are formed when benefits can be obtained from individuals working as a team.

• Armen Alchian

• Harold Demsetz

• Adam Smith