In Week 2, students will employ the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. Students learn about welfare economics–the study of how the allocation of resources affects economic well-being–and will discover that under most circumstances, the equilibrium price and quantity is also the one that maximizes welfare. Students will review different sources of externalities and a variety of potential cures and will see that while markets are usually a good way to organize economic activity, governments can sometimes improve market outcomes. Students will see how the U.S. government raises and spends money and the difficulty of making a tax system both efficient and equitable. 

Assignment Steps 

Scenario: Imagine you have been assigned the responsibility of preparing a paper for the governor's next economic conference. 

Prepare a minimum of 800-word paper addressing each of the following:

• Explain why equilibrium of supply and demand is desirable.
• Explain the following concepts using the concept of consumer and producer surplus:
  • Efficiency of markets
  • Costs of taxation
  • Benefits of international trade
• Discuss how externalities may prevent market equilibrium and the various governments policies used to remedy the inefficiencies in markets caused by externalities.
• Include at least one chart or graph to help explain sn economic concept in your paper. Include the chart's source citation and a reference.
• Analyze the difference between the efficiency of a tax system and the equity of a tax system as it refers to the costs imposed on taxpayers using the benefits principles. 
• Use a Running head on the title page and use a page header on the other pages.
• Use a section heading for each topic in your paper.