Microeconomics - Econlib - 0 views
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The motivating force for the change came from the macro side, with modern macroeconomics being far more explicit than old-fashioned monetary theory about fluctuations in income and employment (as well as the price level).
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Many different distortions can create similar anomalies. If cotton is subsidized, the price farmers get will exceed, by the amount of the subsidy, the value to consumers. Society thus stands to gain by eliminating the subsidy and moving to a price that is the same for both buyers and sellers.
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Public finance (see public choice) looks at how the government enters the scene. Traditionally, its focus was on taxes, which automatically introduce “wedges” (differences between the price the buyer pays and the price the seller receives) and cause inefficiency.
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