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Policy conflicts
In their attempts to achieve the policy objectives, governments often face what are called conflict of objectives. These arise partly because unlike private individuals, governments strive to achieve a multiplicity of objectives.
For instance, a more equal income distribution certainly conflicts with efficiency in the economic system (which reduces, the total output available for everyone).
Secondly, a fiscal policy which is meant to control unemployment may cause inflation if it achieves full employment or policies to combat inflation might call for a cut in public expenditure which in the short-run may lead to a higher rate of unemployment and a less equitable distribution of income and wealth.
Also the policy of maintaining low council houses rents on equity grounds results in long waiting list; this may be undesirable on efficiency grounds as it acts as a barrier to labour mobility and this in turn may increase unemployment.
A fiscal policy meant to cure balance of payments may not just reduce demand for imports but also reduces demand for domestically produced goods. This in turn can have a knock on effect in the form of lower output and higher unemployment.
Relevance of The Law of Diminishing Returns The law of diminishing returns is important in that it is seen to operate in practical situations where its conditions are fulfille
U.S. retail industry, Arc Elasticity is correctly used to assess the dollar magnitude of net benefits of a decision to raise price/output combinations by 5% in the short and medium
A chemical producer dumps toxic waste into a river. The waste decreases the population of fish, decreasing profits for the local fishing industry by $100,000 per year. The firm cou
If the marginal product of L is MPL = 10K - L and the marginal product of K is MPK = 10L - K, then what is the maximum possible output when the total amount that can be spent on K
The relationship between, total expenditure and price elasticity of demand has summed up in the below table: Table: Elasticity and Consumption Expenditure Elas
PROPORTIONAL TAX Is where whatever the size of income, the same rate or same percentage is charged. Examples are commodity taxes like customs, excise duties and sales tax.
Types of Income Elasticity of demand Depending upon the product, demand might increase or decrease in response to a rise in income. There are thus five types of income Elasti
• Budget constraint, budget line, budget set, Budget constraint is a very important concept in economics and is utilized even in advanced economic theory. Let the competent tutors
1. Define 'Arc Elasticity'. 2. Explain the law of 'Diminishing marginal returns'. 3. What is 'Prisoner's Dilemma', of non cooperative game? 4. What is 'Third degree Discrimation'?
Disadvantages The effect on incentives High progressive tax makes work and extra effort become less valuable. The effect on the willingness to accept risk
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