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Economics is a social science that mainly deals with production (supply) and consumption (demand) of commodities. It has been a popular subject for 100s of years. Like every other subject, it has been evolving since its birth. Today, new institutional economics are widely accepted as compared to the old institutional economics.
In order to fully comprehend the phenomena of transaction cost and/or evolutionary economics, it is imperative that the concept of management accounting be fully understood as well. Management accounting may be defined in various manners. It is basically related to the use of accounting information by managers of organizations. It helps them in making prudent and timely decisions to run their businesses in an efficient and effective manner.
"Transaction Cost Economics concerns itself with markets and hierarchies as alternative governance mechanisms for completing a set of transactions. Market forms of governance tend to rely on prices, competition, and contracts to keep all parties to an exchange informed of their rights and responsibilities it is based on two assumptions about economic actorseconomic transactions are intendedly rational, but only limitedly so and economic actors seek self-interest with guile." (http://findarticles.com/p/articles/mi_qa3933/is_199811/ai_n8812605/print)
According to Williamson (1996), this type of economics is basically related to the, "governance of contractual relations" and it consists of three levels which can be easily understood by means of the schematic diagram shown below:
The institutional environment helps us to understand and define that "rules of the game". ...
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