HND经济学导论OUTCOME3

Market Failure and Government Policy

SCN: 177099996

GTB4

Li Wenxuan

Tutor: Lou Qiuyin

November 6th, 2016

Content 1.0 introduction

2.0 Market Failure

2.1 Merit Goods

2.2 Public Goods

2.3 Imperfect Competition

2.4 Externalities

3.0 Welfare Policy

3.1 Some important welfare

3.1.1 child benefits

3.2 Case of welfare

3.3 Instrument

4.0 Conclusion

Reference

1.0 Introduction

Economy is human activity that consists in producing exchanging, distributing, and consuming goods and services, studied by economics and realized inside on. In this report, discussing the reasons for market failure and probe government roles in relation to each of the following and government policy.

2.0 Market Failure

The market is a set of buyers and sellers with the potential to trade with each other. But when the market cannot distribution goods and labor efficiency that is market failure.

2.1 Merit goods

Merit goods are products whose consumption or production creates social benefits that exceed the private benefit. Just like education, healthcare, public transport. Because many people cannot know anything the advantages, so the government should intervene people choice. Government can get to make a law. For Chinese, have ‘Nine-year compulsory education law’. That can help people choose merit goods and benefits of people.

2.2 Public Goods

Public goods are ready for societal members enjoy the items together, strict sense of the public goods with non-competitive and non-exclusive. It is a public thing just like the Park bench or civil defense siren. Someone used it that do not hinder others use it. The government should build this goods, because do not have someone could even want to build build but the society need it. The government use tax to build and maintain it.

2.3 Imperfect Competition

Imperfect competition is monopolistic competition and oligopoly. It is meant by perfect competition cannot maintain. Because have some buyers or sellers could affect the market price. The market cannot change the price. Because the imperfect competition will decrease the market efficiency. The government should change it to adjust a market to a new environment. For example make a law. Just likes Antitrust Law.

2.4 Externalities

The following sentences are from Wikipedia. In economics, an externality is the cost or benefit that affects a party who did not decide to incur that cost or benefit. Economists often urge all governments adopt policies that "internalize" an externality, so that costs and benefits will affect mainly parties who choose to incur them. Just like the pollution, government thinks who take this who should solve this. If there are external benefits, such as in communal safety, less of the good may be produced than