Market Failures: Competition, Externalities, and Public Sector
Failure of Monopoly and Competition
Another argument that justifies public sector intervention in the economy is the warranty of competition. Markets can only allocate resources efficiently when buyers and sellers act in perfect competition. This means many suppliers and consumers produce and consume the same good, and, more importantly, none of them have special control over the price. When the market deviates from perfect competition, there is a failure in competition.
Factors Limiting Competition
Many
Read MorePublic Budget, Economic Cycles, and Fiscal Policy
The Public Budget and the Economic Cycle
The budget is related to the different phases of the economic cycle. However, the opinion on this relationship differs according to the school of economic thought.
Monetarist View
Monetarists believe that the economy has mechanisms to correct all imbalances without state intervention. Therefore, public spending should be limited as much as possible, and the budget should remain balanced annually; expenditures must match revenues.
Keynesian View
According to Keynesian
Read MoreUnderstanding Fiscal Federalism: Functions and Financing
Fiscal Federalism
Local finance deals with the interrelationship between various government units and substations of the internal problems of each. The first objective is the study of relations between the various levels of hacienda. It is necessary to delimit the different levels of public finances, in terms of hierarchy and in terms of choice and delimitation of the units and assign to each its appropriate powers and limitations on their income and expenditures.
Assigned Function
Goods and services
Read MoreUnderstanding Money: Functions, Types, and Value
Understanding Money
Money: Is any merchandise that is commonly accepted by a society as a means to exchange to pay for goods and services.
Features of Money
- Medium of Exchange: Money must be interchangeable. This occurs when it is essentially required to be exchanged for other goods and services.
- Unit of Account: Money must be an accounting unit. This occurs when the value of a good is normally used to express the value of other goods and services.
- Store of Value: Money must be a conservative value.
Advertising’s Economic Impact: Views, Competition, and Effects
The Economics of Advertising: An Analysis
1. Three Views of Advertising Economics:
The three views of advertising economics that have evolved are: Informative view, persuasive view, and complementary view. Advertising affects demand by exerting a complementary influence on the consumer’s utility function with the consumption of the advertised product.
2. Main Impact of Advertising on Society’s Economy:
The typical expected effects are to raise sales, maintain them over time, and improve the general
Read MoreInflation and Unemployment: Causes and Effects
Inflation and Unemployment: A Deep Dive
Understanding Unemployment
Unemployment occurs when individuals are actively seeking work but cannot find employment. The unemployment rate represents the percentage of unemployed workers within the total labor force. There are two primary types of unemployment:
- Voluntary Unemployment: Occurs when a worker declines a job because the offered wage is deemed too low.
- Involuntary Unemployment: Arises due to external factors, such as union influence or government regulations,