In: Economics
How efficiency and fairness can be achieved int he US markets? I want the answer in four paragaph
Markets are efficient when resources are used to produce the goods and services people value most highly. When marginal benefit equals the marginal cost, the efficient quantity is produced. The sum of consumer surplus and producer surplus is maximized at a competitive equilibrium. According to Adam Smith, each participant in a competitive market is “led by an invisible hand to promote an end which was no part of his intention.” The efficient quantity of a good is the quantity that makes marginal benefit from the good equal to marginal cost of producing it. If marginal benefit exceeds marginal cost, resources use will be more efficiently if the quantity is increased. If marginal cost exceeds marginal benefit, resource use will be more efficiently if the quantity is increased. At the market equilibrium, resources are used efficiently.
In a competitive market the demand curve shows buyers’ marginal benefit. The supply curve shows the sellers’ marginal cost so at the equilibrium in a competitive market; marginal benefit equals marginal cost where resources are used efficiently. So the competitive market is efficient.
The requirement that people in similar situations be treated similarly. Two broad and generally conflicting views of fairness are:
Fair if the Result Isn’t Fair:
It’s Not Fair if the Rules Aren’t Fair
For example, if price hike in a natural disaster shop offers water for $5 and he owns the water. It is not fair that he should be compelled to help. Government buys water for $8 government offers the water for sale for $1 a bottle, its “normal” price.