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Published byEdith Hunt Modified over 9 years ago
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Market failure and Government’s role
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DEFINITION: Whenever the market system (supply and demand running the economy) fail to give society the best results. Examples include: High unemployment High inflation Homelessness Monopolies Excessive pollution Lack of health care Etc., etc., etc.
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What does the guns vs. butter analogy imply about government intervention?
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Additional spending on the homeless? On health care for everyone? More research for an AIDS cure? Better schools? Cleaning up the environment?
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DVD Ch. 18 - From Deficits to Debt – government spending, taxing, borrowing
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Merit goods: Goods that benefit society, but tend to be underprovided by the market system. Examples: hybrid cars, trees, health care Demerit goods: Things that are harmful to society, but tend to be overprovided by the market system. Examples: cigarettes, big SUVs, booze
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Pollution Economics: Negative Externality (a cost to society, not factored into the cost of something) http://www.youtube.com/watch?v=BPE2G92 Vmpg http://www.youtube.com/watch?v=BPE2G92 Vmpg
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Not really? But check it out anyway! Positive externalities: A benefit to society that isn’t included in the cost of an item. Example: you buy and plant trees that make the area prettier and the air a bit cleaner for everyone.
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Direct provision of goods and services · The extension of property rights Taxes (on demerit goods) and subsidies (merit goods) Tradeable pollution rights Regulation, legislation and direct controls Advertising
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Definition: When the government intervenes in the market, and makes things worse, or fixes one problem but creates another. Example: Rent control The rent is too damn high! Video http://www.youtube.com/watch?v=Gg5Swy TvAHw http://www.youtube.com/watch?v=Gg5Swy TvAHw
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Progressive: The more income, the higher percentage tax paid Proportional: Everyone pays the same percentage of their income in tax Regressive: Lower income people pay a higher percentage of their income in taxes
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Should people pay based on their ability to pay or how much they use what the government provides? Should the rich old guy with no kids pay 20 times as much for schools as the poor guy with 3 kids in school? Should the poor guy get the full benefit of our schools, roads, military, etc. without paying any taxes?
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Who’s responsible for your well-being: you or Big Brother? How much should government protect and help those who are in the country illegally?
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It’s been a while!
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