Market Coordination

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Definition: Market Coordination

Market Coordination refers to the synchronisation and integration of activities, across command and control structures. The demand and supply curves interacting in the market generate price signals as a result of which separate economic activities of individuals who are engaged in division of labour are coordinated.

Coordination failures happen when firms and other price setters fail to interact among themselves to send the correct signals. When firms fail to coordinate among themselves, recession occurs. This leads to the underemployment equilibrium whereby forms settle for a consistently low employment and potential output as a result of which the firm moves to a suboptimal equilibrium.

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