microeconomics help

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Economics

Description

Purpose of Assignment

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 1,050-word paper addressing 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.
  • 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.

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

Format consistent with APA guidelines.

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Explanation & Answer

Attached.

1
Running head: EQUILIBRIUM OF SUPPLY AND DEMAND

Equilibrium of Supply and Demand
Student’s Name
Affiliated institution

2
Running head: EQUILIBRIUM OF SUPPLY AND DEMAND

Introduction
Market equilibrium is the price and quantity that equates demand and supply of a
particular product or service. Point of equilibrium can be represented graphically by the
intersection between supply curve and demand curve. Different variables in the economy cause
changes in the equilibrium quantity and prices, which are usually described by the shifts in
demand and supply curves. When the quantity demanded of a particular good increase while the
price is held constant, it is referred to as an increase in demand. The result is a shift of demand
curve to the right. The effect of this shift is an increase in equilibrium price. A change in demand
curve may occur due to; a positive change of taste and preferences, increased income for the
buyers, reduction in the costs of complementary good, an increase in the price of a substitute
good or market expectations that cause the consumer to demand more of a product or service.
However, the demand curve can shift to the right if the demand of a product or service falls; this
happens if the opposite of factors leading to an increase of demand happens (Azevendo, 2016).
A supply curve will shift outwards when the seller is willing to supply more holding the
price of good or service constant. When supply increases, there will be a decrease in equilibrium
price and consequently, an increase in demand. Suppliers would be willing to supply more due to
factors...


Anonymous
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