((Microeconomics)
The point where MSB = MSC indicates that there is an optimal level of production
A market with Positive externalities occurs when benefit travels to a third party. Subsidized goods and benefits will lead to a positive externalities which creates spillover benefits
Education is an example of positive externalities, therefore, if the market were left alone, it will have a greater marginal social benefit than marginal private benefit at the market quantity of production.
When a market experiences a negative externality, it tends to be producing more a good than is socially desirable. A spillover benefit occurs here to individuals who are neither consumers nor producers of a product yet are responsible for costs.
The government can intervene and fix this market failure by issuing a per-unit tax, which is equal to the marginal external cost on producers, with the intention to decrease the amount produced by increasing the costs of production.
<<Negative Externalities: NES<< | <<Positive Externalities: PED<< |
---|---|
N - Negative | P - Positive |
E - Externality | E - Externality |
S - Supply (two supply curves, labeled MPC and MSC) | D - Demand (two demand curves, MPB, MSB) |
There is no doubt that most (if not all) economies experience inequality in income distribution. There are many reasons for this inequality, some of which include:
This graph conveys the total income earned by the number of households. The line of perfect equality in the economy is 45 degrees, as indicated. However, the inequality is conveyed by a banana shaped curve.
The gini coefficient can be used to calculate inequality. It ranges from 0 to 1, where 1 conveys the income going to one family, while 0 represents all the families receiving the same amount of income.
Taxation is a form of government intervention which is set by the government to reduce income inequality. Some taxes tend to improve inequality, while others make it worse. Here are the types of tax:
^^Proportional Tax^^: applies the same tax on everyone regardless of their income. the same percentage total income in tax will be paid by all individuals.
^^Regressive Tax:^^ the average tax burden decreases as percent of income rises.