Concept explainers
Institutions and the different types of institutions.
Explanation of Solution
The institution is a set of rules of behavior, which is necessary to run the economy. The institutions are important to maintain a smooth functioning of an economy because they help to set limit on the social interactions, political interactions, as well as the economic interactions of the economy. The institutions can either be formal or informal. The formal institutions means that there will be a set of predefined laws or regulations in the economy, which will be written and well published such as the civil codes and university standard of behavior, and so on. There are informal institutions, and the informal institutions will not be predefined and written like the formal institutions. They will be the social norms and rules that are being carried over through generations and those include the table manners as well as the social behavior, and so on.
The organization is the association of the individuals who are formed to achieve a certain objective in the economy or to attain a standard of the economy. The difference between the institution and organization is that the institutions are the rules that govern the organizations.
Institutions: The institutions are a set of pre-defined rules and laws that govern the economy.
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Chapter 2 Solutions
EBK INTERNATIONAL ECONOMICS
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