In Week 2, students will employ the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. Students learn about welfare economics--the study of how the allocation of resources affects economic well-being--and will discover that under most circumstances, the equilibrium price and quantity is also the one that maximizes welfare. Students will review different sources of externalities and a variety of potential cures and will see that while markets are usually a good way to organize economic activity, governments can sometimes improve market outcomes. Students will see how the U.S. government raises and spends money and the difficulty of making a tax system both efficient and equitable.
Scenario: Imagine you have been assigned the responsibility of preparing a paper for the governor's next economic conference.
Prepare a 1,050-word chart as shown below addressing the following:
- Define Equilibrium and Explain why equilibrium of supply and demand is desirable.
- Define the concept of consumer and producer surplus and Explain the following concepts using the concept of consumer and producer surplus:
- Efficiency of markets
- Costs of taxation
- Benefits of international trade
- Define Externalities and Discuss how externalities may prevent market equilibrium and the various governments policies used to remedy the inefficiencies in markets caused by externalities.
- Define the Benefits Principle and Analyze the difference between the efficiency of a tax system and the equity of a tax system as it refers to the costs imposed on taxpayers using the benefits principles.
Cite a minimum of three peer-reviewed sources, not including your textbook.
Click the Assignment Files tab to submit your assignment.
Markets and the Economics of the Public Sector Chart
Explain why an equilibrium point is desirable.
Define what is the concept of Consumer and Producer Surplus?
Using Consumer and Producer Surplus, explain the Efficiency of Markets.
Using Consumer and Producer Surplus, explain costs of Taxation.
Using Consumer and Producer Surplus, explain the Benefits of International Trade.
How do Externalities prevent market equilibrium?
What government policies remedy inefficiencies in markets caused by Externalities?
Define the Benefits Principles?
Using the Benefits Principles, analyze the difference between the efficiency of a tax system and the equity of the tax system.