MyEconLab Concept Video
Because resources are scarce, they must be allocated among their competing uses. Doing nothing and leaving resource use to chance is one method of allocation. Price gouging—charging an unusually high price for an essential item following a natural disaster—is another. The goal of this chapter is to evaluate the ability of a market price to allocate resources efficiently and fairly.
But market price is only one of several methods of allocating resources. To know whether the market does a good job, we need to compare it with its alternatives. We also need to know what is meant by an efficient and fair allocation.
Economists have much more to say about efficiency than about fairness, ...