
The market inefficiency that is being exploited by Grameen Bank.
Concept Introduction:
Market Inefficiency: It is a situation in which there is a lack of information either to the buyer or to the seller. In case of loanable fund market, inefficiency generally means that the market
Grameen Bank: It is a bank setup with the main function to provide loans to the poor people without any legal obligation and collateral security. It also takes responsibility of a borrower if one gets into any difficulty.

Explanation of Solution
Inefficiency exploited by Grameen Bank:
There is much inefficiency that Grameen Bank has exploited. Some of them are:
- It ensures that the loans taken by the group member are repaid without any legal obligations and credit history of the person.
- It also takes financial responsibility of the person who borrows from such a bank and gets into some difficult situation.
- If all the members repay the loan at the right time, then they are offered a large amount of loan.
- It provides loans not on the basis of current price but the amount of the repaid loan by its member.
Source of inefficiency:
- The major source of inefficiency in such a market is the lack of communication between borrowers and lenders.
- It is because the needs of borrowers are not fulfilled by the bank due to borrowing constraints like collateral assets and credit history.
Conclusion:
Thus, communication between borrowers and lenders is very important in loanable funds market.
Want to see more full solutions like this?
- M” method Given the following model, solve by the method of “M”. (see image)arrow_forwardAs indicated in the attached image, U.S. earnings for high- and low-skill workers as measured by educational attainment began diverging in the 1980s. The remaining questions in this problem set use the model for the labor market developed in class to walk through potential explanations for this trend. 1. Assume that there are just two types of workers, low- and high-skill. As a result, there are two labor markets: supply and demand for low-skill workers and supply and demand for high-skill workers. Using two carefully drawn labor-market figures, show that an increase in the demand for high skill workers can explain an increase in the relative wage of high-skill workers. 2. Using the same assumptions as in the previous question, use two carefully drawn labor-market figures to show that an increase in the supply of low-skill workers can explain an increase in the relative wage of high-skill workers.arrow_forwardPublished in 1980, the book Free to Choose discusses how economists Milton Friedman and Rose Friedman proposed a one-sided view of the benefits of a voucher system. However, there are other economists who disagree about the potential effects of a voucher system.arrow_forward
- The following diagram illustrates the demand and marginal revenue curves facing a monopoly in an industry with no economies or diseconomies of scale. In the short and long run, MC = ATC. a. Calculate the values of profit, consumer surplus, and deadweight loss, and illustrate these on the graph. b. Repeat the calculations in part a, but now assume the monopoly is able to practice perfect price discrimination.arrow_forwardThe projects under the 'Build, Build, Build' program: how these projects improve connectivity and ease of doing business in the Philippines?arrow_forwardhow utillity relate to microeconomics ?arrow_forward
- How Command Economics Relate to Principle Of Economics?arrow_forwardhow commond economies relate to principle Of Economics ?arrow_forwardCritically analyse the five (5) characteristics of Ubuntu and provide examples of how they apply to the National Health Insurance (NHI) in South Africa.arrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education





