1/15/2018 Worksheet: Markets and Market Failure - Elsa´s Economics

Elsa´s Economics
(/)

Worksheet: Markets and Market Failure

(http://elsas-
economics.weebly.com/homework/worksheet
-markets-and-market-failure) Elsa Sillanpää
12/10/2015 0 Comments (http://elsas-economics.weebly.com/homework/worksheet-markets-and-market- Economic blog for
failure#comments) Economics class in
International School of
  Latvia
1. In free market the prices are set by the demand and supply,
so th producerscan change the price where ever they want to, Categories
The prices can be changed if the demand curve shifts  and All
there won't be any government interventions stopping the (/homework/category/all
price changes and the price can always be in the equilibrium. )

RSS Feed (/1/feed)

2. a) Public goods are goods, which are produced by government and everyone have right to use it at
the same time. Because in free market everything is private and government does´t have anything to
don with the market, there is not public goods at all in free market.
b) Monopolies reduce competition, and then the prices are not set freely by consumers and
producers.
c) If there is inequality in the economy, there is more consumers that have different amount of
money to spend and so threr will be less demand for expensive products.
d)Merit goods are goods that are good for society, like education, and they are under-provided and
so on under-consumed in free market economy, demerit goods are bd for society, like for example
hard drugs, and they are over-produced and -consumed. 

3. In mixed economy the government can produce public goods, so in the mixed economy there can
be public goods, when in the free market economy there is not.
In mixed economy government can impose government interventions, so too high prices can be kept
down with price ceiling.
Government can inpose a price ceiling for products that are important, but too expensive for less
wealtier people.
In mixed economy the government can add taxes, ban the product or educate or advertise to make
people not want to try/use the product.. For companies, which are producing merit goods,
government can for example give subsidies

4. Public goods are an example of a market failure. If producing a public good is too expensive, the
market will disappear.
Price ceiling creates excess demand, wich means that there is more demand than supply, wich can
lead to black market.
There will be excess demand in market where is price ceiling.

https://elsas-economics.weebly.com/homework/worksheet-markets-and-market-failure 1/3
1/15/2018 Worksheet: Markets and Market Failure - Elsa´s Economics

Taxes do not usually stop people using demerit goods, because demerit goods are usually inelastic
products. Banning may cause more harm, than consuming the demerit goods and  advertising and
educating are expensive.

HOMEWORK (/) NOTES (/NOTES.HTML) CALCULATIONS (/CALCULATIONS.HTML)

5. a) In London, there is much more pollution caused by cars and taxes, waste treatments and
disposal and public power than in W. Yorkshire or in Glasgow. In West Yorkshire´s dominant
pollution source is industrial combustion and processes and solvent usage. In Glasgow there is more
airpollution caused by commercial and residential combustion or other vechiles except cars or taxes,
than in London or West Yorkshire.
b) West Yorkshire creates lots of pollution by  industrial ways and using solvent. This may mean that
the West Yorkshire has lots of industries and not so much homes and normal houses. Glasgow may
be more suburban-oriented, because its pollution is created commercial and residential combustion
an buses. London is an urban area, so it is polluting by public power, cars, taxes and waste
treatment.
c) welfare loss measured as an amount of money.

6. a) Like t is said in the text, the wellfare loss caused by transporting goods by Heavy Goods
Vechiles can reach 28,000 £ a year. Lorries kill people not only by hitting cars, bicycles and people
but also by polluting so much. European Union also calcultaed that the externals costs of transport
amont to nearly 10% of GDP.
b) The government being reluctant about making the trucking rms pay the whole amount of the
exernal costs may be caused by the price of other ways to transport products. If trucking would be
much more expensive then producers would choose other ways to transport their products, which
may have even worse external costs.
c) Increasing the prices of te diesel, which is used for Heavy Goods Vechiles, would probably increse
the prices of their transporting services, which would decrese the demand for those servises. This
would reduce the amount of lorries, which of course would reduce the amount of polluion and and
accidents caused by trucking transport. However this could lead to a change of the way how
products are transported, so the external cost would just be caused by a different way of transport.
44-tonners may be better solution, because they are not bigger and they do not pollute more than
normal ones, they only can carry hevier loads and they damage roads less.

Like 0 Tweet

0 Comments (http://elsas-economics.weebly.com/homework/worksheet-markets-and-market-failure#comments)

Leave a Reply.

https://elsas-economics.weebly.com/homework/worksheet-markets-and-market-failure 2/3
1/15/2018 Worksheet: Markets and Market Failure - Elsa´s Economics

Name (required)

Email (not published)

Website

Comments (required)

Notify me of new comments to this post by email SUBMIT

CREATE A FREE WEBSITE POWERED BY

https://elsas-economics.weebly.com/homework/worksheet-markets-and-market-failure 3/3