Economics questions

Running Head:ASSIGNMENT 1

7

ASSIGNMENT

Q6. In your own opinion, provide at least two pros and two cons of government intervention in a free market system with examples.

Government intervention is accompanied by several advantages such as, provision of goods which are not provided in the market, provide quality goods underprovided in the free market, reduction inequality and poverty through tax and benefit system, and also bound monopoly power (Wang, 2018).

However, despite the many benefits, it has some disadvantages, such as incentives effects on an increase in taxes and welfare programs. Consequently, Government interventions may lead to fewer choices of commodities. An example of government intervention in the health sector, the government can offer universal health care to prevent people from dying unaffordability health services. In this way, it can improve the long term labour productivity as workers with better health care who can work for longer hours without applying for sick leaves

Q7. How do you distinguish between the concepts of the D and S functions in microeconomics and the concepts of the AD and AS functions in macroeconomics? Why are they different?

In microeconomics supply and demand is an economic model of price estimation in the market, it suggests that holding both demand and supply equally in a competitive market change, the unit price for a specific commodity or other traded thing changes until it arrives at a point when the amount demanded will be the same as the amount required which will lead in an economic equilibrium of the cost and the amount transacted.

Aggregate supply is the total amount of goods and services that organizations are willing to vend at a given price in a country. On the other hand, aggregate demand is the overall amount of goods and services that will be bought at the possible price levels. Both the AS and AD are plotted together to determine the equilibrium in macroeconomics (Agénor & Montiel, 2015).

Q8. Briefly explain how the problem with information asymmetry caused the financial collapse on Wall Street and financial trouble in the health-care service industry. Provide an example for each of these cases.

The Wall Street crash that happened in 1929 was the major American stock market crash. It is began in September and came to an end in October, a time when the share prices on the New York Exchange distorted. The key factor that caused the collapse was the overproduction of agricultural yield, which created economic anguish among the American agronomists. The stock crash led straight to the great depression in Europe when stocks were nosedived on the New York stock exchange.

It led to disruption on the worldwide system funding, trade and manufacture, and the consequent meltdown of the American economy, which was also experienced in Europe. The employed workers went on strike, demonstrated in public to call for public attention.

Q9. From your own real-life experience, provide an example of adverse selection and its possible moral hazard. How would it be possible to avoid or at least minimize the problem of adverse selection and moral hazard?

Moral hazard and adverse selections are vital concepts related to the problem of the information gap in extremely many markets. Moral hazard takes place when the insured clients have a higher likelihood of taking huge risks knowing that entitlement will be paid by their cover. The customers are more aware of her intended action more than the producer (Pauly, 2015)

An example of a moral hazard is when the bank is of the controversial issue of bank bailout for and a bank is aware that there is a good opportunity for it to get extra financial support when its experience problems. An illustration of an advance selection is in medical insurance. Most people who are likely to purchase health insurance are those who are sure they will use it.

Q10. Make a list of the pros and cons of the individual mandate of Obamacare.

Obamacare, also referred to as the affordable act (ACA), was signed to law in 2010, to provide affordable medical insurance to Americans. It was also designed to protect consumers from insurance company tactics that might increase costs in hospitals (Rice et al. 2018). Some of the advantages of the ACA are, millions of Americans have obtained health insurance, medical services are affordable to many people, reduction in the cost of prescribed drugs and also people with prevailing medical conditions cannot be denied coverage, However, despite the many benefits of ACA it also has some disadvantages such as many people are required to pay for premiums, increase it taxes and also fines for people without insurance coverage.

References

Agénor, P. R., & Montiel, P. J. (2015). Development macroeconomics. Princeton university press.

Garcia, P., Irwin, S. H., & Smith, A. (2015). Futures market failure?. American Journal of Agricultural Economics, 97(1), 40-64.

Himmelberg, R. F. (2016). The Great Depression and the New Deal. Westport, CT: Greenwood Press.

Mearman, A. (2019). Post Keynesian economics and the environment: waking up and smelling the coffee burning?. International Journal of Green Economics, 1(3-4), 374-380.

Pauly, M. V. (2015). The economics of moral hazard: comment. The american economic review, 58(3), 531-537.

Rice, T., Unruh, L. Y., van Ginneken, E., Rosenau, P., & Barnes, A. J. (2018). Universal coverage reforms in the USA: From Obamacare through Trump. Health Policy, 122(7), 698-702.

Wang, J. (2018). Innovation and government intervention: A comparison of Singapore and Hong Kong. Research Policy, 47(2), 399-412.

Zhao, X. G., Jiang, G. W., Nie, D., & Chen, H. (2016). How to improve the market efficiency of carbon trading: A perspective of China. Renewable and Sustainable Energy Reviews, 59, 1229-1245.