Economic Issues

Outcome3 Report

F7J8 34

Economic Issues: An Introduction

Declaration

I hereby declare that this submission is my own work and that, to the best of my knowledge and belief, it contains no material previously published or written by another person or material which has to a substantial extent been accepted for the award of any other degree or diploma at any university or other institute of higher learning, except where due acknowledgment has been made in the text.

原创性声明

兹呈交的论文，是本人在导师指导下独立完成的研究成果，在论文写作过程中参考的其他个人或集体的研究成果均在文中以明确方式标明，本人依法享有和承担由此论文而产生的权利和责任。

Signature:        ________________

 Date:         ________________

Content

1.        Instruction        4

2.        Findings        4

2.1 Market failure        4

2.1.1 Public goods        4

2.1.2Monopolies        5

2.1.3External influence        5

2.1.4 Asymmetric information        5

2.2        UK Government policy on welfare        6

2.2.1Taxation:        6

2.2.2 Reformation        7

3.        Evaluation        8

4.        Conclusion        9

5.        Reference        9

1. Instruction

My reporter is expounding the market failure, and in my explanation I make appropriate reference to the role of government in relation to each of the following: Public Goods, Monopolies, External influence and Asymmetric information. Later, I will explain the UK government policy on welfare and identify and describe the instruments the government use to achieve their policy and give a justified evaluation of the performance of the policy in relation to its use within the UK

1. Findings

2.1 Market failure

Market failure is a situation that the market cannot allocate goods and services efficiently. In my opinion, market failure means that the public interest cannot be satisfied by market forces. There have four reasons, which are public goods, monopoly, external influence and asymmetric information, in the market.

2.1.1 Public goods

The public goods are available to members of society to enjoy common items, which have non exclusive and non competitive characteristic. Non excludability refers to a person to enjoy the public goods does not affect the use of another person while non competitive is refers to the consumer increase does not cause the increase of production cost. For example, the national defence is the public goods, which brings safety to people without getting money. To be more specific, when a citizen enjoys a national security, he will not affect the others to enjoy national security at the same time.

2.1.2Monopolies

There have two types in monopoly —— oligopoly and perfect monopoly. Oligopoly is a market state that a small number of sellers dominate the market, which has a significant characteristic that a few companies monopolize a market. Such as Sinopec and CNPC control whole oil market in China. The perfect monopoly is a market structure that only has one producer in the whole industry. That is to say, there have only one company supply goods or services of a particular industry in a certain geographical range, for example, the government undertake whole things for railway from planning to construction.

2.1.3External influence

Market economy activities based on reciprocal transaction and those in addition to transaction relationship come with effect on others called by external influence. For example, a village wants develop in their economic, so people build factory beside river. However, the waste water that the factory pollutes in the river cause damage to people who live in there. The factory pollutes waster water to produce productions while people pay money to buy them, nevertheless, the factory will not give money to people who damaged by the waster water.

2.1.4 Asymmetric information

Asymmetric information means that people who participates the economic activities hold different information. This make someone may use information superiority to fraud, which will damage the legitimate transactions. For example, when we go to the insurance company to buy insurance, the information that both us hold are unequal. Thus, some staffs will use their information make us to buy less bonus insurance.

1. UK Government policy on welfare

Britain established a "welfare state" in 1945. Britain's social welfare system of long history and connotation is broad, which plays a positive role in promoting development of the British social and also has the negative influence. In the recent 10 years, the British government awares of the drawbacks of the welfare system, and take measures to reform to turn a negative into a positive, which can promoting the economy development.

Broad social welfare refers to improve the standard of living of the masses of social member of various policy and social services, aiming to solve the majority of members of the community in all aspects of the welfare problems. The social welfare of narrow sense refers to provide social care and social services to weak life ability of children, the elderly, parent families, disabled and chronic mental patients so on. So the welfare has become a subject which includes Life, education and medical care.

In western, people call it welfare economics, which is the study of how an economy can best allocate its resources to ensure that they achieve the greatest utility or economic welfare of its people. When resources are used efficiently then maximize the welfare or utility of all, this is refers to people’s well being, and the United Kingdom Government believes it has a role in the redistribution of income and wealth allowing the increase in economic welfare. This policy is achieved by following points.

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