ECO 365 Week 2 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. 

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

Format consistent with APA guidelines. 

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