Menu

Unit 1 Micro

0 Comment

Micro Introduction In common, anytime unrestricted market is banned from setting charges in symmetry, supply and demand will not equal, and excesses or deficiencies will transpire. When a price floor is set, the lesser limit on price is beyond that clearing charge, and supply surpasses demand, so there will be an excess. In circumstance of setting a price ceiling, a higher frontier is set on the price, below which the economy would logically want. Thus, demand is greater than what it ought to be, and supply lesser, because manufacturers refuse to sell at a loss. Consequently, there will be excess demand, or shortages (Mankiw 2011). This will occur in any sector of the economy, ranging from rent controlled houses, to basic needs supplies, and to luxurious human wants. In your opinion should our government impose price floors and/or price ceilings in our economy? Do they do more harm than good?For the duration of President Bush administration, the administration had levied price floors, which market analysts claimed were below the floor. In contrast, they did not produce price ceilings. As the economy operates, price floors alone have the propensity of gratifying the wealthy societal members, and captivating from the poor the petite they have, and at times, taking from the poor what they do not basically have to give (Mankiw 2011). Imposing price ceilings may create shortages, because it may discourage production, because manufacturers won’t be in a position to determine the profit margin they require from given products. It’s evident that price ceilings and price floors are inter-linked. For government efficient intervention in the economy, it should formulate a plan to impose both price ceilings and floors concurrently. By doing so, both the consumers and producers will be affected, but in a weighted manner such that the general societal members, especially those with low income reaps the benefits.Do you feel there is an excessive amount of regulation in our economy in general? Why or why not? Government involvement in the economy is way too far. Its fascination with safeguarding health, security and convenience has complicated the workings of the economy. For instance, the directive from government to have all pools in community centers and hotels fortified with lifts to guarantee easy access for the incapacitated has hiked the costs of these lifts to $8,000 to $20,000. This is not good for business, and has predisposed some community centers and hotels to close their pools completely. In another case, New York Mayor Michael Bloomberg has endeavored to ban the sale of soft drinks in servings with a capacity over 16 iotas. He proposes to levy the ban within all city eateries, and in other formations such as movie theatres and sports arenas. This is a government measure, which aims to endorse healthy lifestyle. In contrary, what it does is impose an arbitrary limit upon personal choice. It is not worth tax payer’s money to pass such a regulation.The above are clear illustrations of excessive regulations, which are strangling and bloating the American economy. This sheds negative lights on government regulations, in that it tries to intrude in personal life choices, and practices of private businesses, leaving an individual strangled from all sides, with no freedom at all. Review Questions Economies oppose control of prices because of the adverse effects they have on the economy. Controlled prices may influence unethical business practices such as hoarding of goods to create unusual shortages (Mankiw 2011). If the government removes tax on buyers of a good and impose it to sellers, sellers will automatically transfer this amount to buyers in terms of increased price. In practical terms, the sellers will bear buyers tax burden, and will be taxed more by the respective authority. There will be no difference in the amount sellers receives net of tax, this tax transfer will be inconsequential to sellers profit. There will be no effect on the quantity of goods sold as well (Mankiw 2011). The level of tax imposed on a good will influence it price, such that, the higher the tax, the greater the price. Price received by sellers is a factor of profit margin target of the seller after tax. Quantity sold is not usually influenced by tax, but in circumstances where goods are taxed in terms of quantity, sellers might subdivide them into smaller quantities to ensure buyer affordability (Mankiw 2011). ReferenceMankiw, N. G. (2011). Principles of economics. Mason, Ohio: Thomson South-Western.