ABSTRACT
This chapter describes the economic theory and its claims. We should first clarify what exactly is meant by the efficiency of resource use. This is how economists view the idea: if an economy is using its resources with a hundred per cent efficiency, then it is not possible to increase the output of anything without cutting down that of something else. Economics and its cousins such as accounting and marketing would never have been born. Needless to say, many find this free market proposition hard to accept. A common reaction to it is complete disbelief; that it is patently untrue. The reasoning behind the claim that competitive markets are fully efficient is actually quite simple. Adam Smith is very often considered the spokesman of free market economics and the critique of market economics is directed against his work. Utilitarianism is the idea that the value of an action is derived from the utility it contributes.
