Economics for Public Administration, Essay Example

Each economic system is one that attempts to fulfill the same goal, of fulfilling consumer needs in the most efficient way possible. One thing consumers will desire is shelter. In a pure market economy, the process of providing housing is done completely without any overarching planning. The government in the pure system would have no impact, although market systems usually feature some level of government involvement such as guaranteeing the contracts of the mortgages and imposing safety standards. Beyond that, the houses would be built by those who saw profit opportunities with those who see profit opportunities’ providing the financing. Higher prices, representing greater demand, cause more people to put money into building houses. These increases the supply, until housing prices fall, or at least grow more slowly, and fewer houses get built. This can work in the opposite manner and is how market economies are supposed to remain in equilibrium.

In a command economy, the central government would be the ones tasked with filling the demand for housing. A central planner would make a decision on how many houses needed to be built and would also order other companies to make all the materials needed for the houses. He would order both the training and allocation of workers for the housing. In the pure command economy, the central planner needs perfect knowledge of the economy due to the many decisions he must make for each sector. In fact, in the pure command economy every single decision on resource usage would be left up to the government, while the market economy relies on pricing signals for its resource allocation.

The expected effect of this policy would be lower levels of inequality, but also lower growth for the economy. The reason for the lower growth is that such a policy would create strong disincentives for work. For one, those receiving the guaranteed level of income will have little incentive to work unless that job will bump them beyond $35,000 in wages. Someone making $10,000 before the subsidy will have no reason to attempt to get a raise to $15,000 as their take home income will be $35,000 in either case. On the other side, the higher income tax on individuals making over $250,000 will reduce their incentives to work as well. As time spent working beyond that income level will result in less money taken home, people with these income levels will more often choose leisure over work that comes with a lower return. These would result in more idle resources, specifically human capital resources.

Whether or not this policy will be worth undertaking is dependent on several things. One is rather straightforward, figuring how much these disincentives actually slow down growth. However, there is also the question of how much inequality we are willing to trade for growth, which has no empirically provable answer. Another variable is how much we value leisure as a society. If the government took a hands off role they would get less leisure than in this system. Again, the societal tradeoff between leisure time and GDP growth cannot be known empirically.

The price of abortion went down after it was legalized by the State of New York. This can be expected as prohibition often leads to black markets with higher price levels. At each stage of production, there has to be some additional steps taken to ensure the illegal activity will not be caught and each of these steps comes with an increase in prices. By making it legal, the training of doctors and nurses for the procedure can be done more openly and cheaply. Similar effects happen throughout the chain that allows for abortion procedures to become cheaper. On top of this, government regulation, the additional transparency in the procedure and better trained doctors performing them means abortions became cheaper and safer with their legalization.

The term for this phenomenon is negative externality. What that means is that a third party not involved in the transaction is negatively impacted by it. In a standard transaction, the seller sells a product and the buyer gives him money for it. Those two parties are the ones affected and since they both consciously made a decision to take part in it, there is little need for any sort of regulation. However, in this case, those who live by the factory are impacted even though they have no part in the transaction. Solutions to this problem include taxing transactions associated with negative transactions as well as outright banning them. On top of that, Springfield could set up their legal code in a way that allows the citizens to sue and recoup some of the negative impact the factory has on them.

Housing prices have fallen since the factory moved in. Prices are set partially by demand and people demand those things that they want. Since people want houses without unbearable stenches, people do not want the Springfield houses as much as they did without the factory. This means less demand and therefore the price of houses in the town will fall with all other things being held constant.

This firework display is a public good, provided that citizens desire fireworks shows as entertainment and do not view them as noisy distractions.

Assuming that fireworks shows are considered desirable, this show is a public good because each citizen of the town benefits from it. On top of that, no one benefitting from the show prevents anyone else benefitting from it. There is no limit on the amount of people who may view the show. Another important characteristic is that it is non-excludable. There is no way for anyone to produce this show without allowing everyone within a certain area to see it. Tickets cannot be charged to a show in the sky.

It would be produced less if it was privatized and more importantly, the supply would not meet the demand. Since there is no way to charge anyone to see the show while excluding those who do not pay, the private sector will have no incentive to produce fireworks shows as they cannot be made profitable.

If they were producing at those levels, it would mean there is something wrong with the economy. That point would fall inside the curve, meaning they are not producing at their full capacity during the period. Some sort of deadweight loss is occurring and ending it must be the goal of policy makers.

Bytes cannot produce 100,000 calculators at this time. Even when all of their resources are focused on the production of calculators, they can only make 40,000. This economy is not big enough to make that many calculators and would have to grow two one hundred and fifty percent to reach that possible level of production, even if it dedicates every resource they have to calculator building. Points to the left of the curve, such as this one, are not possible at the current time and can only be achieved through new infrastructure or increased efficiency. As well as that, getting to this level of calculator production would require growth and a huge emphasis on calculator production over microcomputers that would take resources best suited for computer production and used them elsewhere.

The term here is “sunk cost”. A sunk cost is one that cannot be recouped and it should not be taken into account when judging any further moves. In this case, the money previously spent on the aquatic center has been spent and will not come back. Further spending may make sense, but it should be evaluated independently of the money previously spent. Sunk costs are like the old saying, “don’t go throwing good money after bad.” If an investment has gone sour, spending more money on it is often a way to just increase losses.