chapter  I
7 Pages

The Objectives of Economic Policy

In a laissez1aire, market, competitive economy there are important forces at work promoting economic efficiency. If a factor of production is employed in one activity in which the value of its marginal product is relatively low, it will be offered a higher reward in an alternative activity in which the value of its marginal product is relatively high. The movement of factors from activities in which the values of their marginal products are low to activities in which the values of their marginal products are high will increase the value which purchasers place, at current prices, on the total output of the community.!