Explain why equilibrium of supply and demand is desirable

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.

Assignment Steps

Scenario: Imagine you have been assigned the responsibility of preparing a paper for the governor’s next economic conference.

Prepare a minimum of 800-word paper addressing each of the following:

· Explain why equilibrium of supply and demand is desirable.

· Explain the following concepts using the concept of consumer and producer surplus:

· Efficiency of markets

· Costs of taxation

· Benefits of international trade

· Discuss how externalities may prevent market equilibrium and the various governments policies used to remedy the inefficiencies in markets caused by externalities.

· Include at least one chart or graph to help explain sn economic concept in your paper. Include the chart’s source citation and a reference.

· 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.

· Use a Running head on the title page and use a page header on the other pages.

· Use a section heading for each topic in your paper.

Cite a minimum of three peer-reviewed sources, not including your textbook.

Format consistent with APA guidelines.

 

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