《西方经济学》双语课件PPTch06-Supply, Demand, and Government Policies[精品].pptVIP

* Demand for yachts (and other luxury items) is price-elastic: if the price of yachts rises, rich consumers can easily avoid the tax by spending their millions on some other luxury item. Supply of yachts is less elastic, especially in the short run. It is difficult for the companies that build yachts to re-tool their factories and reeducate their workers to produce some other product. Hence, companies that build yachts (and companies that sell other luxury items) pay most of the tax, and the rich pay relatively little of it. * Recall one of the 10 principles from chapter 1: Markets are usually a good way to organize economic activity. This means that, in absence of market failures (which we will learn more about in later chapters), the allocation of resources resulting from the free market equilibrium is optimal. Hence, government policies which alter this allocation tend to make the economy worse off. When we study market failures later, we will see that government policies can – in principle – improve on the market’s allocation of resources, and make society better off. First, though, we need to learn how to measure the impact of government policies like taxes on society’s well-being, as well as define what, exactly, we mean by “well-being.” This field of study, called “welfare economics,” is the topic of the next three chapters. * * CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES CONCLUSION: Government Policies and the Allocation of Resources Each of the policies in this chapter affects the allocation of society’s resources. Example 1: a tax on pizza reduces the eq’m quantity of pizza. Since the economy is producing fewer pizzas, some resources (workers, ovens, cheese) will become available to other industries. Example 2: a binding minimum wage causes a surplus of workers, a waste of resources. So, it’s important for policymakers to apply such policies very carefully. CHAPTER 6 SUPPLY, DEMAND, AND GOVERNMENT POLICIES CHAPTE