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MerrandaR_ECO365_WK2.docx

MerrandaR_ECO365_WK2.docx - Running head SUPPLY DEMAND...

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Running head: SUPPLY, DEMAND, EQUILIBRIUM, AND TAXES - OH MY 1 Supply, Demand, Equilibrium, and Taxes - Oh My Merranda Ramirez ECO365 February 10, 2018 William Akamine
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SUPPLY, DEMAND, EQUILIBRIUM, AND TAXES - OH MY 2 Supply, Demand, Equilibrium, and Taxes - Oh My The supply and demand model develop consumer surplus and producer surplus as a measure of welfare and market efficiency. The equilibrium price and quantity is also the one that maximizes welfare. There are different sources of externalities and a variety of potential cures using Markets as a way to organize economic activity, but governments can sometimes improve market outcomes. The U.S. government raises and spends money for the good of the economy and they have the difficulty of making a tax system both efficient and equitable. Supply and demand, trade, and taxes all effect how profitable an economy is and the possibility of market failure. Supply and Demand Equilibrium The law of supply and demand is when there is the adjustment of the supply and demand curve to find an equilibrium (Mankiw, 2015). Sometimes the supply and demand curve shifts for numerous reasons like internal or external factors. Shifts in supply would constitute that there was a shift because of the seller. These factors would be, the price of the good (like a store charging $3 for a slushie, but another place offers a slushie for $1), input prices, technology, expectations, or the number of sellers that are selling the same good (Mankiw, 2015). Buyers and sellers directly affect whether or not the supply and demand curve reach or remain at an equilibrium. If there is too much or too little of a good or service it can cause shifts or changes in the balance of the economy. When there is a surplus or excess of a good, there is more of a good supplied and less demanded (Mankiw, 2015). Like the example above the seller who is selling their water for $3 will have an excess supply for their slushies, whereas the other place might possible have a shortage. There are times when there is a supply shortage: when there is a higher demand for a good or textile there is a supply shortage because of the higher demand (Mankiw, 2015).
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SUPPLY, DEMAND, EQUILIBRIUM, AND TAXES - OH MY 3 Shortages are an increase in demand, but a seller not having enough supply. The example of the
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