Market Failures: Government Solutions & Economic Interventions
Market Failures and State Intervention
Market failures often necessitate state intervention to achieve economic efficiency and social welfare.
Understanding Externalities
Externality: Occurs when the production or consumption of goods directly affects consumers or businesses not participating in the purchase or sale, and when those effects are not entirely reflected in market prices.
Externalities may be associated with either production or consumption and can be positive or negative.
Negative Externalities
Read MoreKey Concepts in Economics: Markets, GDP, Inflation & Employment
Market Structures & Competition
Perfect Competition Markets
Goods and services are exchanged voluntarily at a price fixed by the market as a result of the free operation of the laws of supply and demand. In this situation, not a single company has enough power to influence the price, so all companies compete on equal conditions.
Imperfect Competition Markets
One or more companies have the power to influence price, to a greater or lesser extent. The smaller the number of companies, the greater their
Read MoreEssential Macroeconomic Concepts & Federal Reserve Insights
Real GDP Decrease (2007-2008): Production Levels
When real GDP decreases from 2007 to 2008, we can conclude that production levels are lower in 2008.
Who Changes Money Supply?
The Federal Reserve can change the quantity of money in the economy.
Annual Budget Decision-Makers
The annual budget is decided upon by the President of the United States and the United States Congress.
Federal Reserve Board Structure (FOMC)
The Board of Governors of the Federal Reserve (FOMC) is a seven-member board, with each member
Read MoreMacroeconomic Fundamentals: Indicators, Growth, and Markets
How the Economy is Measured
What is GDP and its types? Why distinguish them?
Gross Domestic Product (GDP) is the total market value of all final goods and services produced within a country over a specific period, typically one year. It serves as a broad indicator of economic activity and performance.
There are two primary forms of GDP:
- Nominal GDP: Measures economic output using current prices in the year the goods and services are produced. It can be misleading when comparing over time because it
Optimizing Public and Private Service Delivery
Balancing Public and Private Service Provision
To determine the right balance, consider public and private provision as inputs used to produce a desired output or result. For instance, teachers, classrooms, books, and private tutors are all inputs into producing educational quality. What truly matters to people is the final result (e.g., high educational quality), not the specific method used to achieve it.
Key Factors in Service Provision
Several critical factors influence the choice between public
Read MoreUnderstanding Key Economic Concepts: Poverty, Unemployment, and Growth
Poverty
Poverty is a complex and multifaceted issue affecting individuals, communities, and societies worldwide. Key aspects include:
Definitions
1. Absolute Poverty: Living without basic necessities like food, water, shelter, and clothing.
2. Relative Poverty: Living below a certain standard of living, often defined as a percentage of the median income.
Causes
1. Economic Factors: Unemployment, low wages, and lack of access to education and job opportunities.
2. Social Factors: Discrimination, inequality,
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