Markets And The Economics Of The Public Sector:Explain why equilibrium of supply and demand is desirable.

Markets And The Economics Of The Public Sector

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. 
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