Points

Lecture Four Government and the Operation of Markets detail 1 emulous securities industrys supposedly maximise consumer tautological CS ( social welf atomic number 18) and manufacturers dissipation PS (profit). Since Consumer Surplus + Producers Surplus = Societys welfare SW. then(prenominal) the SW must also be maximised. We also let out that ALLOCATIVE efficiency is achieved. Any other(a) output may enlarge the surplus of consumers at the expense of the producers and vice versa. BUT the resulting SW give not be maximalised, and deadweight loss to societys welfare DWL will occur. DWL is the result of the inefficiency in the market. commit 2 CS = the residue between the actual equilibrium hurt that a consumer pays and the bell that he/she was prepared to pay. Point 3 PS = the difference between the minimum price a producer could campaign and the actual equilibrium price.

Point 4 precede Graph -Society Welfare is maximised -Supply = Demand -Allocative efficiency is achieved -Any other metre other than Point 5 Governments recognize that on any(prenominal) cause that the theoretical model may not achieve the lividness that a civil society needs in align to be able to function/ -They may introduce price ceilings and floors, and delve options to allocate scarce goods (price ceilings) and services or switch with plain fork up (price floors). -They may introduce subsidies and realize revenue tax on production and at the same time be heedful how the elasticity of demand of add effect who pays what proportion of the proposed sales tax Point 6 Price controls: a good may introdu! ce a price ceiling, a legally enforced market price that is less than equilibrium market price. This would restore some directness in the market. Political thing. E.g. Rental Price GRAPH Point 7 Some possible alternatives to rent ceilings that might achieve inexpensive accommodation to a greater number of people, are; election 1: A supply-shift solution Government could augment supply by building or financing the...If you necessity to hold up a full essay, order it on our website: OrderCustomPaper.com

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