Government Intervention in the Market

Role of the Government

— Public Sector Services

— Monopolies

— Restrictions and Barriers to Entry

— Reducing Trade Barriers Vs Import Tariffs

— Taxation

— Subsidies and Welfare payments

— Laws and Regulations

—

Conclusion

Market economy is an economic system where the price of a commodity is determined on the interchange of demand and supply. In the modern world, pure system of market economy does not exist. Market economy is different from mixed economy where the price of a commodity is influenced by governmental control. This system is based on three freedoms:

- freedom of the consumer to choose among competing products and services,

-freedom of the producer to start or expand a business, and

- freedom of the worker to choose a job and employer.

Equilibrium exists when quantity sellers are willing to sell is equal to the quantity buyers are willing to buy at a given price.

Control questions:

1. What does mean individual supply?

2. What kind of market economy law do you know?

3. What do you know about market supply?

4. Give more information about market equilibrium.

5. What do you know about government intervention in the market?

 

Literature:

1. English for economists and managers: textbook/ O. V. Ulyanov, S. V. Grishin; yurginskiy technological Institute. – Tomsk: Publishing house of Tomsk Polytechnic University-theta, 2011. – 111 p.

2. Besanko D.A, Brauetugam R.R, Gibbs M.J Microeconomics,2011, Chicago

3. Griffiths A, Wall S.Economics for business and management,2011, England

4. Varian H.R. Intermediate microeconomics,2010, University of California at Berkeley

5. Boyd, W. Harper. Marketing Management.- Boston, 2010

The world economy

The purpose: Consider the main aspects of "Globalization", elements of the World Economy, ways that countries interact, policies that affect others

Key words: globalization, world economy, countries interact, IMF, WTO, World Bank, International Economics, trade

Questions:

4.1 “Globalization”

4.2 Elements of the World Economy

4.3 Ways that Countries Interact

4.4 Policies that Affect Others

4.1 “Globalization”

• “Globalization”

– Means different things to different people

1. The increasing world-wide integration of markets for goods, services and capital.

2. Also the role of MNCs, IMF, WTO, World Bank.

3. Elsewhere: domination by United States.

• Some see good, others bad

– Bad: reading by powell

– Good: reading by Bhagwati

• Some aspects of globalization declined with the world recession of 2008

• The Economist, on Nov 15, 2014, reported “Signs of Life”:

• Globalization is back

• Various measures of globalization (though not all) have risen past their previous peaks

• The “depth” of trade (its volume) has increased

• The “breadth” of trade (number of borders crossed) has not fully recovered

• International Economics

• Is NOT about countries

• It IS about interactions among countries

Elements of the World Economy

• World Economy consists of

– Countries: a few hundred

(CIA lists about 240)

(WTO has 160 members)

– People: over 7 billion

(7.216 1/5/15, compare 320 m. US)

– Land: about 15 times the US

– An excellent source of information about countries is the CIA World Fact Book

– (Just Google “fact book”)

• World Economy consists of

– GDP (2013 est., per CIA, in US$)

• World: Total = $87.25 trillion

per capita = $13,100

• US: Total = $16.72 trillion

per capita = $52,800

• Implication

– US is very unusual

• Very rich

– US has less than 5% of world population but almost 20% of world income