when does trade increase welfare?
- Trade increases welfare when it leads to fall in price
of commodities.
- Trade increases competition and competition causes fall
in price of goods and services.
- Now further, consumers even start getting varieties of
products and these products are quality oriented.
- All these outcomes of trade increase consumer surplus
and welfare.
- microeconomic market inefficiency
Micro economic market inefficiency is witnessed when
market forces of demand and supply do not work appropriately.
Monopolist tendencies leads to the inefficient result. Firm does
not operate at the minimum point of AC and P is not equal to MC.
Thus, both productive as well as allocative efficiencies are
compromised here.
- how can the government improve welfare?
- Government play very critical role in furthering
welfare of people.
- Government makes provision of free education and health
care facilities that are inevitable for welfare of
people.
- Further, government promotes and sustain infrastructure
in economy.