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Leitner explains what a market freeze is and some of the theories as to why these freezes occur. A puzzling feature of the recent financial crisis is the collapse of trad-ing volume and the lack of transac-tions in many financial markets that were historically quite liquid. This is strange because we expect demand
When they see an economic issue or problem, they go through the theories they know to see if they can find one that fits. Then they use the theory to derive insights about the issue or problem. Economists express theories as diagrams, graphs, or even as mathematical equations.
- Government Spending. How much and in what direction the government spends. For example, cronyismwhereby government spending is intended to enrich an elite.
- Government Deficits & Debt. A deficit is spending that exceeds government revenues. Government debt is the total debt obligations that a government has accumulated, often due to many decades of deficits with interest.
- Government Interest Expense. The cost to service interest on government debt. This can consume a government's resources or can effectively spiral out of control where there is a very large debt relative to the productive capacity of a nation.
- Government Entitlements. The commitments a government has made for future spending to persons or units of the government. For example, social security, medical coverage and unemployment insurance programs.
- Market Equilibrium
- If Price Is Below The Equilibrium
- If Price Is Above The Equilibrium
Market equilibrium can be shown using supply and demand diagrams In the diagram below, the equilibrium price is P1. The equilibrium quantity is Q1.
In the above diagram, price (P2) is below the equilibrium. At this price, demand would be greater than the supply. Therefore there is a shortage of (Q2 – Q1)If there is a shortage, firms will put up prices and supply more. As price rises, there will be a movement along the demand curve and less will be demanded.Therefore the price will rise to P1 until there is no shortage and supply = demand.If price was at P2, this is above the equilibrium of P1. At the price of P2, then supply (Q2) would be greater than demand (Q1) and therefore there is too much supply. There is a surplus. (Q2-Q1)Therefore firms would reduce price and supply less. This would encourage more demand and therefore the surplus will be eliminated. The new market equilibrium will be at Q3 and P1.Apr 10, 2020 · In this book we tackle those questions and fill some of the current void of ideas and thinking about economic and political recovery. We develop a framework and principles for an institutional re-build, presenting a path to recovery based on the ideas of private governance, permissionless innovation and entrepreneurial dynamism.
- Darcy W E Allen, Chris Berg, Sinclair Davidson, Aaron M. Lane, Jason Potts
- 2020
Nov 20, 2020 · The main issues are: What to produce? How to produce? For whom to produce? Examples of economic problems include. How to deal with external costs/pollution, e.g. pollution from production. How to redistribute income to reduce poverty, without causing loss of economic incentives.
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How price controls reallocate surplus. Price ceilings and price floors. Price and quantity controls. The effect of government interventions on surplus. Taxation and dead weight loss. Example breaking down tax incidence. Percentage tax on hamburgers. Taxes and perfectly inelastic demand.
