...MEASURE OF ECONOMIC WELFARE (MEW): HISTORICAL DEVELOPMENT OF MEW: In 1960’s, there started a widespread interrogation on the standard of living, traditional ethics and customs, and the ‘consumption oriented society’ in particular. In this general phase of rebellion allied with ancient and eroded institutions, morals and customs, and economic growth as evaluated by GDP became the center of objection and denial. Some critics claimed that economic growth may no longer be considered necessary as it does not enhance welfare. In response to these opinions, in 1972 William Nordhaus and James Tobin formulated Measure of Economic Welfare (MEW). Their main objective was not to form a welfare measure but an instrument to examine the extent of correlation between economic progress and well-being. According to the originators of this measure, GDP is a measure of production only and does not account for consumption. The ultimate target of economic affairs is consumption. So this measure has been formulated to crack down the inconsistencies associated with GDP and welfare. COMPOSITION OF MEW: Initially, the creators of MEW had to reorganize the components of GNP as outlays on consumption, investment and intermediates and its only consumption that boosts and influences welfare. Since the amount of output devoted in the renovation and replacement of capital goods do not adds up to the welfare, so it is subtracted from GNP giving NNP. Moreover, there are a lot of long-lasting goods, which...
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...The Economics of Amartya Sen “Social Choice and Welfare Economics” (NPWES, 2008) And as related to Philippine Economy: National Budget Cycle In Partial Fulfillment of the Requirements for the Degree Bachelor of Science in Hotel and Restaurant By: Binalingbing, Jhan Ray N. February 2014 INTRODUCTION “…a budget is a useful tool to help ensure that what limited money is available will be spent for the family’s most important needs, like food, clothing and shelter.” -Florencio Abad Secretary, Department of Budget and Management Every household knows that their budget is indispensable, important and has the capability to turn and mobilize their life around. Every day, millions of Filipinos work just for a meager share to eat, drink, and live, and tomorrow, work again to live for a day. Yet reality, tells us that many still suffer and live in difficult conditions. The National Statistics Coordination Board (NCSB) reported that in 2012, 4.2 million Filipino families experienced or lived in poverty or that is 19.2% percent. The same report also stated that a family of five needed a budget of PhP 5,513 to meet basic food needs every month and Php 7,890 to stay above the poverty threshold (basic food and non-food needs) every month. Such can be attributed to the inflation rise to 4.1 % from the year 2009-2012. What could have caused this statistic to be constant and rise up even more? Is there lack in financial stewardship and accountability on the part of Filipinos? Or even...
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...The Welfare State - A Cost Benefit Analysis The role of welfare within our society has always been controversial. This problem emphasizes the need to understand the roles of variable factors when pertaining to the subject of welfare within our society. The proposed analysis will address the phenomenon of welfare assistance and several factors which may contribute to the increase or decrease of welfare assistance to the poor in 4 ways: (1) by defining major concepts and any other concepts about which there is likely to be misunderstanding (2) by further examining the past history pertaining to the subject of welfare assistance within the United States; (3) by developing the formulation of a hypothesis which will provide for an explanation of welfare; and finally (4) determining whether or not the benefits of welfare assistance outweigh the cost. Ultimately, the purpose of this research analysis is to investigate variable factors that may contribute to the increase or decrease of welfare assistance. This cost benefit analysis is an attempt to explain the tentative assumptions of others pertaining to the subject of welfare, in order to determine and explain the relationship of welfare to the economic cost and benefits. Cost-Benefit Analysis Before welfare assistance can be analyzed there is a need to define the terms that will be used. Policies like welfare assistance are worthwhile only if the benefits to society are greater than the costs. When choosing among a set of policies...
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...included in normative economic analysis offers the arguments that inclusion is unnecessary as results are the same, that inclusion can result in double counting and will result in acceptance of projects that fail to pass a potential compensation test. I show that these arguments are unpersuasive or incorrect. Instead the inclusion of moral sentiments has potential to improve normative analysis. This is illustrated by comparing the standard criteria for benefit cost analysis (Kaldor-Hicks) that does not include moral sentiments with a modification (KHZ) that does. KHZ dominates KH even by the principles of KH itself. JEL Codes: Q20, D6, D63, D64 I. Introduction The practical criteria for economic efficiency, the Kaldor-Hicks (KH) criteria, have existed for over sixty years, without the profession fully facing the issue of whether or not moral sentiments should be included in normative economic analysis. In part this is due to historical reasons, in part to normal inertia associated with any academic discipline, in part because of the recent interest in moral sentiments in the form of existence values and in part because of objections raised to inclusion of moral sentiments. This paper concerns two issues. The first is whether or not it is desirable to include moral sentiments in welfare analysis. The answer to this question will depend in part on the answer to the second question, which is whether there is a suitable economic metric for considering...
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...EPA /EA Semester 2 Sample poster Note: This is not meant to be an example of the perfect poster. But, you will see that it draws out a number of economic concepts, and shows their relevance to this particular story. This poster demonstrates an understanding of course material and avoids frivolous discussion of noneconomic issues. Furthermore, this poster discusses a relevant news article from a reputable source. NB: Economic Welfare is not a topic you can select – this sample project is meant to illustrate what sort of analysis is expected. Topic Selected: Economic Welfare Fuelling Controversy The Economist 11 January 2014 Overview of Article Many governments subsidise fuel consumption. However, many countries that currently subsidise fuel are starting to reverse course. In June 2013, Indonesia increased fuel prices by 44% and decreased their total subsidy cost by $20 billion annually. Malaysia also reduced fuel subsidies – household energy bills increased by 15% as a result. Egypt and India are considering following suit. The key rationale to these governments of removing subsidies was to decrease the budget deficit. Effects of Fuel Subsidy According to Article The article discusses that there are many other benefits to reducing fuel subsidies. o Fuel subsidies generate deadweight loss. o Fuel subsidies make inequality worse – it is mostly the rich that benefit (the rich use fuel disproportionately more). o Removal of fuel subsidies will allow...
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...analysing two different measures of poverty, ‘absolute’ and ‘relative’ and to conclude which is a more accurate or a more suitable instrument in poverty measure. The monetary approach is probably the most common method of understanding poverty. It is highly used by economists and is significantly connected with microeconomic theory. Utility maximisation is the base for this approach and the main instrument used is a poverty line; this sets a threshold where if income or consumption is below, people are then classified as poor. An example of this would be the ‘dollar a day’ where any income below $1 a day is classified as poor. This approach suggests that income or consumption is equivalent to well-being. In developing countries measuring welfare with consumption would be more appropriate than using income, as income is a small component and would be an overestimate. There is plenty of data which can be analysed at household levels. However, poverty is an individual phenomenon where individuals are situated within households. After assuming some measurements between income and consumption, data at the household level can be changed to an individual level by using empirical tools which are ‘equivalence of scales’. Since this approach portrays well-being with income or consumption it may not be suitable as the world is more complex. Human interaction and social behaviour varies significantly which means there are many critiques to this approach. This approach is strongly linked to...
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...Desirable Merit Good Urban planning in the Netherlands: An Overview Sachin Peiris (CEG08025804) Gilang Haruna Dharmasaputra (CEG08024485) Evgenia Papoula Economics 13 March 2015 Socially desirable merit goods are “goods that society deems so valuable that everyone should have them” (Frischmann, 2012, p.45). One such example of this is urban planning, being the focus of this paper. Urban planning has been in the spotlight of many governments although, underprovided many a time. This paper will be an overview of the process of urban planning that the Dutch government has implemented in Amsterdam in the past, the ongoing projects with its objectives and its positive effects on society. In the introduction some features of merit goods will be examined. Furthermore, we will explain what is meant by urban planning and how urban planning is a merit good. In the second part we will scrutinize the importance of urban planning and the role of the Dutch government in providing this service to the public. In the third section of the paper, we will discuss the positive externalities of urban planning in Amsterdam. Finally we will look at, the possibility for this service to be provided by the private sector and whether market failure will arise if left to the provision of the free market. In this discourse, we will interconnect economic theories applying them to the merit good under review viz a viz (urban planning). Merit goods in general tend to be underprovided by producers or under...
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...Discuss the extent to which regulations alone can be used to correct the market failure associated with the sale of fast-food. Regulation involves the imposition of rules, controls and constraints which restricts freedom of economic action in the market place. Fast-food is a de-merit good which is where the social costs of consumption exceed the private costs. The consumption of de-merit goods can lead to negative externalities, in the case of fast-food, negative externalities such as becoming obese or causing serious health issues can be produced. Also, consumers are unaware of the risks or they do not receive the information they need on the menus thus there is a problem of information failure because companies do not put on menus how much calorie a certain food is and if they wish to do so it is sometimes not visible for consumers. Moreover, market failure occurs when the free market mechanism fails to achieve economic efficiency, in this case, market failure has occurred because there hasn’t been allocative efficiency since consumer welfare has not been maximised as more people are becoming obese or are facing serious health issues because of fast foods. MAKE SURE TO ADD IN GRAPH!!!!!!!!!!!!!!!!!!!!!! + EXPLAIN IT!!!! In addition, regulations may help to correct market failure because a regulation will force firms to put calorie content on the packaging and this may help to put people off from eating fast food. This could be due to the fact that they would be more...
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...INTRODUCTION Most developing countries in the Sub-Saharan Africa, on average witnessed significant and consistent economic growth in their early years of independence (World Bank, 2004). Although majority of these countries succeeded in expanding their basic infrastructure and social services among others. It was therefore anticipated that much progress will be achieved in terms of raising the average income per head and improving on the general welfare of Africa following the average growth in real per capita income of about 3.8 % per annum between 1967 and 1970 (Mbanga, 2008). In the early 1970s, developing countries borrowed to finance their current account deficit. Such borrowing was geared towards boosting the level of economic growth and development. By 1980s, the developing countries’ debt had accumulated and the international financial institutions from this period started to provide both technical and financial debt-management assistance to debtor countries. However, this effort still aimed at fostering economic growth, was also equally meant to reduce both debt burdens and poverty level of these...
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...caused an extra cost to the society, such as respiratory problems for the residents living around the polluting firm. For that reason, Australia is taking the leading role in addressing this problem. The country’s firms are only concerned with its private costs (e.g production costs) and will produce at Q1. Figure 1: negative consumer externality in Australian Economy. P* P1 0 Cost/AUD Q* Q1 MSB Quantity/Tonne Welfare Loss MSC MPC Due to the negative producer externality created in the economy, it is not producing at a socially efficient output, Q*, where the MSC is equal to the MSB, therefore there is market failure. Therefore we can say that there is a misallocation of society’s resources. Moreover, there is a welfare loss to society due to the additional units created from Q1 to Q*, where MSC is greater than MSB for those extra units. This is shown by the shaded triangle above. Figure 1 illustrates the fact that there is a welfare loss to the community and decreasing it should be the Australian government’s main focus because it creates economic inefficiency. Figure 2 If the Australian government decides to impose a tax on carbon emissions for the worst polluters, then...
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...Paper STATUS REPORT – IDENTIFYING THE BEST ANALYSIS FOR SAFETY PROGRAMS IN THE WORKPLACE The activities aimed at safety at work are regarded as an investment made in the field of human resources. These activities give rise to costs for the company. The advantages and disadvantages of various types of analysis of costs and benefits are determined by the expectations of the management. This status report considers three different economic analyses. A working hypothesis determines which one of the methods is the most feasible and appropriate in attempting to explain the advantages and disadvantages of a particular safety program. Finally, a conclusion reveals the steps that are yet to be taken, the final recommendation and presentation deadlines. PROBLEM STATEMENT Apart from the ethical/moral reasons, underlying the desire to protect the health and human life, and from the obligations arising from the law of rules and regulations, economics play an increasingly important role in choosing a safety plan. Safety is increasingly being considered as an investment made in human resources (Zangmeister & Nolting, 1996). It is essential to evaluate such investment in terms of return, and based on this criteria a particular safety project is chosen rather than another one. The objective is the evaluation of measures aimed at quantifying the strengths and weaknesses of different...
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...Name: ________________________ Class: ___________________ Date: __________ Fall 2013 Midterm 2 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Welfare economics is the study of how a. the allocation of resources affects economic well-being. b. a price ceiling compares to a price floor. c. the government helps poor people. d. a consumer’s optimal choice affects her demand curve. ____ 2. Consumer surplus a. is the amount of a good that a consumer can buy at a price below equilibrium price. b. is the amount a consumer is willing to pay minus the amount the consumer actually pays. c. is the number of consumers who are excluded from a market because of scarcity. d. measures how much a seller values a good. Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Buyer Willingness To Pay David $8.50 Laura $7.00 Megan $5.50 Mallory $4.00 Audrey $3.50 ____ 3. Refer to Table 7-2. Which of the following is not true? a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke. b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one. c. At a price of $4.00, total consumer surplus in the market will be $9.00. d. All of the above are correct. 1 ID: A Name: ________________________ Table 7-6 Buyer Michael Earvin Larry Charles ID: A Willingness to Pay $500 $400 $350 $300 ...
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...Name: ________________________ Class: ___________________ Date: __________ ID: A Fall 2013 Midterm 2 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Welfare economics is the study of how a. the allocation of resources affects economic well-being. b. a price ceiling compares to a price floor. c. the government helps poor people. d. a consumer’s optimal choice affects her demand curve. 2. Consumer surplus a. is the amount of a good that a consumer can buy at a price below equilibrium price. b. is the amount a consumer is willing to pay minus the amount the consumer actually pays. c. is the number of consumers who are excluded from a market because of scarcity. d. measures how much a seller values a good. Table 7-2 This table refers to five possible buyers' willingness to pay for a case of Vanilla Coke. Buyer Willingness To Pay David $8.50 Laura $7.00 Megan $5.50 Mallory $4.00 Audrey $3.50 ____ 3. Refer to Table 7-2. Which of the following is not true? a. At a price of $9.00, no buyer is willing to purchase Vanilla Coke. b. At a price of $5.50, Megan is indifferent between buying a case of Vanilla Coke and not buying one. c. At a price of $4.00, total consumer surplus in the market will be $9.00. d. All of the above are correct. ____ 1 Name: ________________________ Table 7-6 Buyer Michael Earvin Larry Charles ____ ID: A Willingness to Pay $500 $400 $350 $300 4. Refer to Table 7-6. You have an extra...
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...consumption * SDR = rate of time preference * If the future increase in net benefits > present costs (via consumption rate of interest, CRI) = project passes a potential compensation test * Possible for the winners to compensate the losers * Still have sufficient gains to allow for pareto efficiency * Ex. Net return available to individual savers is 2% per year Project cost (to taxpayers) = $1M this year Net benefit = $3.2M in 50 years * forgoing current consumption of $1M and lending at 2%, return = $2.72M in 50 yrs * therefore, the $3.2M benefit will be preferred * If we ignore intragenerational redistributions, we can suggest that this project would improve social welfare * If individuals seek to maximize their own well-being (economic theory), then marginal rate of time preference = rate at which they can trade present for future consumption (or vice versa) * From a societal perspective, resources that go into investment are worth more than those that are currently consumed * Ex. $1M is saved and invested today, after-tax marginal return to savings is 2%, but the before-tax marginal return to...
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...AS Micro Essays These are some suggested AS Macro Economic essays. The essays are from different exam boards. In practise they ask similar questions. There are different ways to answer questions. But, all these answers contain enough material to get the top grade. Whenever the question requires evaluation, the essay contains the necessary critical distance. Note: These essays are for revision purposes giving suggestions for how to answer questions. Don’t try to pass them off as your own work. AS Micro Essays 1.Evaluate the case for and against governments intervening to try to stabilise the price of copper, for example, through setting up a buffer stock scheme. 2.Evaluate advantages and disadvantages of various methods of government intervention to correct market failure arising from aircraft emissions. 3. Discuss the likely effects on the retail market for coffee if there is a large increase in city centre rents. 4.In the UK, students face increasing tuition fees. Discuss the benefits and costs to society of abolishing all tuition fees. 5.Discuss three policies to reduce the level of cigarette smoking amongst under 21s. 6.Discuss the extent to which governments should subsidise companies who are developing cars which run on clean fuels such as hydrogen? 7.Discuss whether the government is mistaken to worry about monopoly power? 8.Discuss the advantages and disadvantages of the government intervening in agricultural markets? 9.Discuss the effects...
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