Identify The Key Characteristics Of Tce Essay

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Student Name: Cheung Ting Pong Student No. 8215549 Assessment Reference: ME/Jul11/1 What is the “market”? What is the “firm”? What is the difference between “market” and “firm”? According to the Michel Callon, market reflects ordinary experience and the places, processes and institutions in which exchanges occur[1]. However, as per Ronald Coase, the existence of firm is because people begin to organize their production in firms when the transaction cost of coordinating production through the market exchange, given imperfect information, is greater than within the firm[2]. It is observed that the existence of firm is mainly due to the imperfect environment in the market and increase the corresponding cost of transaction, it directly encourages people to organize their demand and supply by the firm to complete the exchange or transaction. For example, people want to wear clothes with well-designed and good out-looking. If under a perfect environment or information, people should know where to get the clothing design from the designer they like and pass the cotton to tailor for making cloth and further produce as the clothes they expected. However, it is impossible to the reality and there are many well branded clothing companies (firm) existed, such as GAP, Marks & Spenser, to organize a group of designers to design the demanded clothes, negotiate with a group of vendors to provide cotton for making cloth and eventually negotiate with group of garment factories to tailor those clothes as finished products. In this chain of transactions, people who want to have new clothes pay much less transaction cost in buying from the boutique directly rather than they go out to source designers, vendors of cotton and garment factory. Therefore, due to the imperfect environment and information in our world, the firm is setup to eliminate the costs to using the market as per

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