The role of_government_in_a_market_economy


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The role of_government_in_a_market_economy

  1. 1. What do you think? Do you strongly agree, somewhat agree, somewhat disagree, or strongly disagree with each statement? 1. The government should increase taxes to expand programs for the elderly. 2. The government should ease up on regulations protecting the environment. 3. The government should break up existing monopolies.
  2. 2. 1) Protecting Property Rights  Encourages people to… Take care of their property Make the most productive use of their property Develop their property in ways that benefit others Article 1 of the U.S. Constitution
  3. 3. 2) Maintaining Competition  Monitor mergers  Regulate monopolies  Prohibit pricefixing, bid-rigging, and market division
  4. 4. 3) Protecting Consumers, Savers, & Investors Consumers Protected Through…    Food & Drug Administration National Highway Traffic Safety Administration Consumer Product Safety Commission Savers & Investors Protected Through…   Federal Deposit Insurance Corporation Security & Exchange Commission
  5. 5. 4) Protecting Workers  The Department of Labor protects workers’ economic rights.  The Occupational Safety and Health Administration protects workers’ physical well being.
  6. 6. 5) Addressing Externalities Externality: A side effect of production or consumption that has consequences for people other than the producer or consumer.  Limit negative externalities  Support positive externaliti
  7. 7. 6) Providing Public Goods  Most goods and services produced in market economies are private. The consumers who purchase these goods consume these goods. Ex: Hamburger, shoes  Public goods are used collectively and no one can be excluded from using them. Ex: National defense, public parks
  8. 8. Public good have 2 characteristics: Nonexcludable Once a public good is produced, it is difficult or : impossible to exclude others from consuming the good, even if they didn’t pay for it. NONRIVAL In When one person consumes a public good, Consumption: it does not prevent others from also consuming the good.
  9. 9. Free-Rider Problem:  THERE IS NO WAY TO MAKE PEOPLE WHO BENEFIT FROM PUBLIC GOODS PAY FOR THEM!  Because of this, private businesses do not have incentives to produce enough public goods.  Therefore, the government often provides them, through tax dollars, if people want them.
  10. 10. 7) Promoting Economic Stability  Fight unemployment  Encourage price stability (reduce inflation)  Promote economic growth
  11. 11. 8) Redistributing Income  Provide an economic safety net (to some degree)  Tax those with larger incomes and help those in need
  12. 12. Roles of Government in a Market Economy
  13. 13. Sample Placard: What might happening does the interesting details in this Why? What rolethreecartoonist be saying about how well the What areisof governmentsample restaurant? cartoon? What Complete the row for the in thisthis cartoon Handout 11. placard on represent? government is carrying out its role in this case?
  14. 14. Circulate around the room to analyze the placards. At each placard, complete the appropriate row on Handout 11.
  15. 15. Trans fats are fats in food that contribute to high cholesterol. Some local governments have banned, or attempted to ban, trans fats in restaurant foods.