6741086-Microeconomics.edited

docx

School

University of Nairobi *

*We aren’t endorsed by this school

Course

MICROECONO

Subject

Economics

Date

Nov 24, 2024

Type

docx

Pages

Uploaded by Carl2030

Running head: Microeconomics 1 Microeconomics Name Institutional Affiliation Course Details and Code Professor Date

Microeconomics 2 Microeconomics Question 1. a. To boost revenue, the city may tax fancy cars instead of food. Mercedes, Audi, Lexus, Porsche, Jaguar, and Bentley demand is less elastic. Even if sales tax rises, purchasers will buy these popular cars because they have few alternatives. This makes price adjustments scarcely affect the demand for luxury automobiles. Bread, grains, and produce demand is elastic. People will choose cheaper options when these things grow pricier ( Krugman, 2015) . Therefore, raising the sales tax on basics will reduce demand and local tax collections. Luxury car demand is inelastic; thus, the city can raise sales taxes. b. To reduce economic inefficiencies, the city should tax essential goods rather than expensive cars. Taxing goods distorts markets and lowers welfare, generating deadweight. Sales taxes increase the prices of goods, reducing consumer expenditure ( Krugman, 2015) . Luxury automobile sales tax increases reduce economic inefficiencies. Inelastic demand makes luxury car buyers less price-sensitive. Higher sales taxes won't reduce luxury car sales, diminishing consumer surplus and economic efficiency. Sales taxes on essential items with a more elastic demand can worsen economic inefficiencies. Rising commodity prices may cause customers to switch to cheaper products or curtail spending, reducing consumer surplus and deadweight loss. c. A city that raises the sales tax on luxury cars to maximize revenues and reduce economic inefficiencies by submitting it on basic foodstuffs must assess whether this promotes equity or helps people experiencing poverty. The wealthy buy Luxury cars, so raising sales tax may not encourage equity. Luxury automobile sales taxes redistribute wealth because the rich pay more. Essential commodity sales tax increases reduce equity. Food costs are higher for low- income families. People experiencing poverty pay more for essentials due to higher sales tax.

Microeconomics 3 Prioritize economic efficiency, tax revenue, and equity ( Krugman, 2015) . Luxury car and basic commodities sales taxes boost revenue and efficiency. This may be unfair because essential food tax increases disproportionately harm low-income people. Question 2. a. Income Inequality: Uneven wealth and income distribution is social inequality. Significant wealth inequality may cause instability. State redistribution reduces inequality by taking from the rich and assisting the poor. Progressive taxation funds lower-income programs and services by taxing the wealthy. Reduced economic disparity can help governments promote equality and provide fundamental necessities. Externalities and Market Failures: Externalities and market failures support government redistribution. Externalities impact society beyond economics ( Krugman, 2015) . Inefficient free market resource allocation fails markets. Redistribution improves resource allocation by fixing externalities and market failures. Social welfare reduces poverty-related violence and illness. The government can reduce externalities and benefit society by distributing money and aid. b. The leaky bucket problem refers to the income and redistribution of resource inconsistencies and the challenges associated with the process. The bucket leaks for three reasons: 1. Administrative Costs: High redistribution administrative costs leak buckets. Understanding and managing revenue redistribution from rich to poor is expensive. Such expenses include tax collection, social welfare administration, and eligibility monitoring. Administrative costs might misallocate resources and diminish redistribution efficiency.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Microeconomics 4 2. Behavioral Responses: Rich and poor behavior may also explain the leaky bucket. Taxing the rich more to pay for needy services may encourage tax dodging or economic behavior shifts. Examples: moving assets or income, tax planning, or limiting economic activity. Thus, the tax increase may need to rise more, causing bucket leakage. Redistribution programs may discourage employment and income-generating activities, increasing system inefficiency and leakage. 3. Rent-Seeking and Corruption: Redistribution Rent-seeking and corruption can leak buckets. Rent-seeking profits from politics or economics. Rent-seeking in redistribution occurs when certain groups take more resources. More efficient resource distribution, corruption, and misuse of adequate finances can result. Rent-seeking and corruption undermine redistribution and deplete resources. c. Leaky buckets affect poverty-reduction redistribution. Bucket leakage reduces redistribution, which helps people experiencing poverty and reduces income inequality ( Krugman, 2015) . Inefficient resource allocation owing to leaky buckets. Rent-seeking, administrative costs, and behavioral reactions limit low resource access. Redistribution may hurt people with low incomes due to inefficiency. Leakage can increase resource distribution costs beyond the intended recipients. Inefficient resource allocation and economics. d. Another problem is moral hazard. Redistribution plans can influence rich and poor behavior due to leaky buckets. Higher taxes on the wealthy may encourage tax evasion or inhibit economic activity, whereas social welfare programs for the poor may discourage labor or self-improvement. 3

Microeconomics 5 a. Macroeconomically, market failure warrants government health insurance. Healthcare has externalities and isn't exclusive or competitive like private goods. Public health initiatives benefit everyone, so one person's health doesn't affect others. This hinders market- based systems. Common are health externalities, when one person's health affects others ( Mankiw, 2020) . Communicable diseases reduce economic stability and output. Government involvement fixes health insurance market flaws to provide universal healthcare, reduce externalities, and improve society. b. When the government provides full health insurance, demand may rise. Cheaper goods and services, including comprehensive health insurance, increase demand, according to microeconomics ( Mankiw, 2020) . The price elasticity of demand suggests customers may seek more medical care, especially preventive services. More use promotes health but wastes healthcare resources. Implementing a government-provided health insurance system requires balancing access and efficiency. c. Comparing single-payer public health care equality advantages against overconsumption and resource pressure economic inefficiencies. I support a single-payer system for economic efficiency and equal healthcare. Controlling overutilization and improving healthcare services decreases economic inefficiencies ( Mankiw, 2020) . Equity covers everyone, promoting social justice and a healthier, more productive community. Thus, a single-payer public health insurance system with careful policy modifications can correct market failures and promote equal healthcare access. Bonus question

Microeconomics 6 The terms opossum and possum are misleading because they are different species. They share some traits but are not adversaries because they live in separate locations and taxonomic families. Opossums are North American marsupials ( Freedman, 2020) . Virginia possums are the most abundant, with prehensile tails and opposable thumbs on the hindfoot. Opossums eat insects, small animals, fruits, and carrion. Forests and communities are their home. Opossums, renowned for "playing possum," weaken and stink to deter predators. Australia, New Guinea, and neighboring islands have North American "opossums" marsupials ( Freedman, 2020) . Common brushtail and ringtail possums are famous. Tree possums eat flowers, fruits, and foliage, unlike opossums. A prehensile tail aids climbing and grasping. They're separate animals that never interact despite their hostile appearance. Opossums in North America and Australia live on different continents. Geographic isolation prevents species conflict. Opossums and possums are other species with different habitats and features, not enemies. North America and Australasia have possums. Knowing the location, behavior, and nutrition disparities minimizes terminology-based prejudice.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Microeconomics 7 References Freedman, B. (2020). Opossums. The Gale Encyclopedia of Science , 5 , 3206-3207. Krugman, P. (2015). Public Goods and Common Resources. Chapter 9 in Economics, (Krugman and Wells, eds). Mankiw, N. G. (2020). Principles of economics . Cengage Learning.

Related Documents

Financial Review- The AFR view.docx

Arthur Lewis Article Analysis Essay.docx

attachment_2 (1).xlsx

2. Hong Kong “The Last Dance” (23 May 2020).pdf

Order 6545571-APA-Module Three Simulation Checkpoint.docx

Screenshot 2023-12-18 at 7.19.08 AM.png

63.docx

KFC and McDonald.docx

Screenshot 2024-01-26 at 2.25.14 PM.png

Screenshot 2023-11-28 212207.png

57620748-J&J Diamond in American Dream.docx

Unit 4 Touchstone Template Maher.xlsx

Recommended textbooks for you

ECON MICRO

Economics

ISBN:9781337000536

Author:William A. McEachern

Publisher:Cengage Learning

Exploring Economics

Economics

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:SAGE Publications, Inc

Economics Today and Tomorrow, Student Edition

Economics

ISBN:9780078747663

Author:McGraw-Hill

Publisher:Glencoe/McGraw-Hill School Pub Co

Managerial Economics: A Problem Solving Approach

Economics

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Cengage Learning

ECON MACRO

Economics

ISBN:9781337000529

Author:William A. McEachern

Publisher:Cengage Learning

Microeconomics: Principles & Policy

Economics

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

ECON MICRO
Economics
ISBN:9781337000536
Author:William A. McEachern
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
ECON MACRO
Economics
ISBN:9781337000529
Author:William A. McEachern
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning