Question

The fundamental lessons about interactions among people are 1) that trade and interdependence can be mutually beneficial, 2) that markets are usually a good way of coordinating economic activity among people, and 3) that the government can potentially improve market outcomes by remedying a market failure or by promoting greater economic equality. Discuss each one of these concepts and explain how the implementation of these principles can improve people’s lives. Use relevant examples where appropriate. Short answer please!

Answer 1

Introduction:-

Gone are the days when people used to trade goods for goods. In today's high paced environment, people trade in goods and services across geopolitical boundaries and markets are regularly monitored by governments to ensure that growth of the country is stable in nature respectively.

The case is based on this basic theme, which is explained as follows:-

1) That trade and interdependence can be mutually beneficial

Indeed, trade and interdependence tend to mutually benefit people. This is the only reason why they have existed for countless number of years and have seen such great progression. People are becoming inter connected and find themselves in constant need for interacting with one another to suffice their needs and wants while being mutually beneficial to one another through market based economics.

For Example: - A doctor provides services to numerous people and earns money through such delivery of services. People are dependent on the doctor for providing them with healthcare and related facilities.

The doctor in turn, can have consumer demand of products such as shoes, food etc. which people will provide with the money which the doctor has earned.

Thus market based economics brings people to a common platform in which they can interact with one another, to purchase goods and services respectively.

2) That markets are usually a good way of coordinating economic activity among people,

As explained above, without the existence of markets, people would be unable to purchase goods and services from one another and as a result would have to return to barter system in which goods were exchanged for goods instead of money.

Market systems allow people to fulfill their needs and demands as they arose and are a perfect way of coordinating and connecting people with one another so that each one gets benefited from a countries resources which are available respectively.

3) That the government can potentially improve market outcomes by remedying a market failure or by promoting greater economic equality

The government’s role in increasing the role of market based economics is undeniable. They have actively maintained confidence of the consumers in the market based system by promoting equality when it comes to the value of what money can buy, it is the same for everyone and the government regularly tries its best to allow accessibility to all sections of the society to such a system.

Further failures such as lack of demand and/or supply are also taken care off by the government which alters its Fiscal Policy and makes changes in interest rates, taxes etc. to regulate the economy and the markets so that the consumers are benefitted to the maximum.

Thus, from both promoting greater equality and preventing market failures market outcomes and growth can take place in a better manner respectively.

Please feel free to ask your doubts in the comments section if any.