Efficiency and equality and the role of government dse
在現代社會，效率和公平成為了許多政策制定者和公民關注的焦點。效率代表著如何在最少的時間和成本內達到最大的生產力和效益；而公平則是指每個人都能夠平等地享受社會資源和福利。然而，實現效率和公平之間往往存在矛盾，因為追求效率可能會導致資源分配不公平，而強調公平可能會降低效率。
政府在這個方程式中扮演著至關重要的角色。政府的政策和行動可以促進效率和公平的達成，但同時也需要考慮到這兩者之間的平衡。政府可以通過設定規則、提供資源、培育創新等方式來推動效率和公平的實現。此外，政府還可以通過紓解貧困、提供公共服務、建立社會保障制度等方式來實現公平，從而減少社會不平等和貧富差距。
在這篇文章中，我們將探討效率、公平和政府的角色之間的關係。我們將討論政府在推動效率和公平方面所採取的策略，以及這些策略的優缺點。我們還將探討政府在實現效率和公平之間的平衡方面所面臨的挑戰，以及可能的解決方案。最後，我們將總結討論，探討政府在效率和公平之間達成平衡的重要性，以及未來政府應該如何在這個方面發揮作用。
Price ceiling
–A maximum price allowed by the government/by law.
–普通商家自己將個價錢set係equilibrium下面唔算price ceiling,但同樣會出現shortage，其影響同price ceiling一樣。
–Effective only when it is imposed below the equilibrium price.
–When the price ceiling is set above the equilibrium (i.e., ineffective), price and quantity transacted will remain at the equilibrium level.
–Example: Rent control
Price | Pc |
Quantity transacted | Q1 |
Total expenditure/revenue | Pc x Q1 |
Point to note
Total expenditure/revenue must drop under an effective price ceiling as both price and quantity transacted decrease.
Summary on the effects of an effective price ceiling
–Price↓
–Quantity transacted↓
–Total expenditure/revenue↓
–Emergence of shortage (excess demand)
Ways to deal with a shortage resulted from the imposition of a price ceiling
-Non-price competition
–Examples: Drawing lots/First come–first serve
-Price competition
–Examples: Imposing extra fees such as entrance fees (sellers to buyers)
-Black market
–係黑市賣嘅嘢會比外面貴，價高者得。
Price floor
–A minimum price allowed by the government/by law.
––普通商家自己將個價錢set係equilibrium上面唔算price floor,但同樣會出現surplus，其影響同price floor一樣。
–Effective only when it is imposed above the equilibrium price.
–When the price floor is set below the equilibrium (i.e., ineffective), price and quantity transacted will remain at the equilibrium level.
–Example: Minimum wage 最低工資 **************
Price | Pf |
Quantity transacted | Q1 |
Total expenditure/revenue | Pf x Q1 |
Point to note
The effect on total expenditure/revenue due to a fall in price (caused by an effective price floor) should be uncertain, depending on the elasticity of demand.
Labour market under minimum wage (an effective price floor)
Point to note
–係最低工資之下，有surplus嘅係workers，即係太多workers請唔曬，唔係有shortage
Summary on the effects of an effective price ceiling
-Price↑
–Quantity transacted↓
–Total expenditure/revenue ?
–Emergence of surplus (excess supply)
Ways to deal with a surplus resulted from the imposition of a price floor -Non-price competition
–Non-price competition
–Examples: Providing free gifts (buyers to sellers)
–Price competition
–Examples: Imposing extra fees
–Illegal price cutting by sellers
Quota
–A maximum quantity supplied of a good allowed by the government/by law.
-Effective only when it is imposed below the equilibrium quantity. (i.e.畫係equilibrium point嘅左邊)
–When the quota is set above the equilibrium quantity (畫左係equilibrium嘅右邊→ineffective), price and quantity transacted will remain at the equilibrium level.
–Example: Import/export quota
Price | P1 |
Quantity transacted | Q1 |
Total expenditure/revenue | P1 x Q1 |
Point to note
–The effect on total expenditure/revenue due to a rise in price (caused by an effective quota) should be uncertain, depending on the elasticity of demand.
Effect on quality under quota
–As a quota would restrict the quantity of a good allowed to be sold, some producers will thus decide to improve their product quality to increase their competitiveness. Therefore, the average quality of the good under quota will increase.
–If an effective quota on a good is removed, the average quality of the good will thus deteriorate.
Summary on the effects of an effective quota
-Price↑
–Quantity transacted↓
–Total expenditure/revenue ?
–Improvement in average quality of goods
Unit tax
–Levied on every unit of output.
-Not the same as Ad valorem tax (percentage tax) which is a certain percentage of the price of a good.
Effects of a unit tax
–After the imposition of a unit tax on producers, the cost of production of producers will increase which will lead to a decrease in supply.
Point to note
–When drawing the arrow indicating the drop in supply, it should be drawn as an arrow pointing upward.
Original price | P1 |
Price after tax = Price actually paid by consumers = Market price | P2 |
Per unit revenue after tax = Price actually received by producers | P3 |
Quantity transacted | Q2 |
Consumers’ total expenditure | P2 x Q2 |
Producers’ total revenue net of tax | P3 x Q2 |
Consumers’ total expenditure
=Total revenue (received by producers) inclusive of tax
=Total revenue (received by producers) net of tax + total tax payment
–The change in consumers’ total expenditure should be uncertain after the imposition of a unit tax, depending on the elasticity of demand.
Producers’ total revenue net of tax
=Consumers’ total expenditure – total tax payment
=Price actually received by producers x new quantity transacted
= (New equilibrium price (P2) – Unit tax) x new quantity transacted
–Producers’ total revenue net of tax must decrease under any elasticity of demand after a unit tax is imposed as both quantity transacted, and price actually received by producers drop.
Distribution of tax burden Total tax burden/total tax payment/total tax revenue received by government
=Consumers’ tax burden + producers’ tax burden
=Unit tax x new quantity transacted
= (P2 – P3) x Q2
Consumers’ tax burden
=Unit tax borne by consumers x new quantity transacted
= (P2 – P1) x Q2
–對於consumers黎講，比多D錢就係佢地嘅burden。
Producers’ tax burden
=Unit tax borne by producers x new quantity transacted
= (P1 – P3) x Q2
–對於producers黎講，收小D錢就係佢地嘅burden。
Summary
Consumers食多D | Ed＜Es |
Producers食多D | Es＜Ed |
一樣食咁多 | Ed = Es |
越inelastic食越多，越elastic食越小
Extreme cases
Consumers食曬 | Producers食曬 |
Perfectly inelastic demand | Perfectly elastic demand |
Perfectly elastic supply | Perfectly inelastic supply |
Unit subsidy
–Granted for each unit of output.
–Not the same as Ad valorem subsidy (percentage subsidy) which is a certain percentage of the price of a good.
Effects of a unit subsidy
–After the imposition of a unit subsidy on producers, the cost of production of producers will decrease which will lead to an increase in supply.
Point to note
–When drawing the arrow indicating the increase in supply, it should be drawn as an arrow pointing downward.
Original price | P1 |
Price after subsidy = Price actually paid by consumers = Market price | P2 |
Per unit revenue after subsidy = Price actually received by producers | P3 |
Quantity transacted | Q2 |
Consumers’ total expenditure | P2 x Q2 |
Producers’ total revenue including subsidy | P3 x Q2 |
Consumers’ total expenditure
=Producers’ total revenue excluding subsidy
–The change in consumers’ total expenditure should be uncertain after the imposition of a unit subsidy, depending on the elasticity of demand.
Producers’ total revenue including subsidy
=Consumers’ total expenditure + total amount of subsidy granted
=Price actually received by producers x new quantity transacted
= (New equilibrium price (P2) + Unit subsidy) x new quantity transacted
–Producers’ total revenue including subsidy must increase under any elasticity of demand after a unit subsidy is imposed as both quantity transacted, and price actually received by producers increase.
Distribution of subsidy Total amount of subsidy granted (by government)
=Consumers’ subsidy benefit + producers’ subsidy benefit
=Unit subsidy x new quantity transacted
= (P3 – P2) x Q2
Consumers’ subsidy benefit
=Unit subsidy enjoyed by consumers x new quantity transacted
= (P1 – P2) x Q2
–對於consumers黎講，比小D錢就係佢地嘅benefit。
Producers’ tax burden
=Unit subsidy enjoyed by producers x new quantity transacted
= (P3 – P1) x Q2
–對於producers黎講，收多D錢就係佢地嘅benefit。
Summary
Consumers享受多D | Ed＜Es |
Producers享受多D | Es＜Ed |
一樣享受咁多 | Ed = Es |
越inelastic享受越多，越elastic享受越小
Extreme cases
Consumers享受曬 | Producers享受曬 |
Perfectly inelastic demand | Perfectly elastic demand |
Perfectly elastic supply | Perfectly inelastic supply |
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DSE Econ 文章系列
Microeconomics
Macroeconomics
- 經濟表現的量度 Measure of economic performance
- 國民收入決定及價格水平 National income determination and price level
- 貨幣與銀行 Money and Banking
- 宏觀經濟問題和政策 Macroeconomic Problems and policies
- 國際貿易和金融 International Trade and Finance
