Markets and the Economics of the Public Sector

In Week 2, each learning team will employ the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. Students learn about welfare economics--the study of how the allocation of resources affects economic well-being--and will discover that under most circumstances, the equilibrium price and quantity is also the one that maximizes welfare. Students will review different sources of externalities and a variety of potential cures and will see that while markets are usually a good way to organize economic activity, governments can sometimes improve market outcomes. Students will see how the U.S. government raises and spends money and the difficulty of making a tax system both efficient and equitable. 

Assignment Steps 

Scenario: Imagine your learning team has been assigned the responsibility of preparing a paper for the governor's next economic conference. 

Prepare a 400-word paper addressing the following:

• Discuss how externalities may prevent market equilibrium and the various governments policies used to remedy the inefficiencies in markets caused by externalities.

Cite a minimum of three peer-reviewed sources, not including your textbook.

Format consistent with APA guidelines.