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Consumerism and its effect on society
Consumerism and its effect on society
Consumerism and its effect on society
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Market failure, a term used frequently by micro economists is utilized when a market is not spending its resources efficiently in a free market. In the article being referred to, market failure is achieved but in this case it is working inefficiently by creating negative externalities. Negative externalities are defined as the situation where a product costs more to society than its private costs. Throughout the article it appears clear that a significant production externality is taking place. This becomes apparent because the production of clothes in Bangladesh has created more than 1000 proven deaths and no private payment can ever pay for that society cost making this a clear case of a market failure, more specifically a negative production externality. It is to be taken into account that not only has the social price already been unfixably surpassed but also it is progressively worsening slowly
In the diagram to the right, a negative production externality is shown according to the microeconomics situation found in the article. It is to be taken into consideration that MPB (marginal private benefit) and MSB (marginal social benefit) are seen as demand. As shown, MPC (marginal private cost) exceeds MSC (marginal social cost). This creates a surplus of supply and thereby moves Qopt to Qm taking the quantity out of what is optimally required by society and creating market failure. On the other hand, price has moved from Popt to Pm thereby creating the external cost that is shown between MPC and MSC. It is through the diagram that it appears clear that producers are in fact overproducing due to the external costs that society has to pay. In this case however, the cost paid by society is manifested by the worsening of health (and death) of the people in Bangladesh.
Regardless off what economic theory might say, the effects given off by the factories in Bangladesh are too negative for an optimal level of production to exist. This means that there is no amount of supply that should ever exist taking the repercussions into consideration. “In Savar, we have lots of coconut trees, but they don’t produce coconuts anymore. Industrial pollution is damaging our fish stocks, our fruit produce, our vegetables.” In this case the externalities cannot be measured accurately because health is only one negative aspect of the problem.
In response to the negative externality given off, a few solutions might be helpful to deal with the excess of marginal social cost.
Gusfield, J. (2011). How Do We Decide What are Social Problems? Retrieved April 6, 2011 from http://www.soc.iastate.edu/sapp/soc235ch02.html
Market failure in a free market is defined as a condition where the allocation of goods is inefficiently done, resulting in an over allocation or under allocation of its resources. Market failures occur due to the presence of externalities.
However, price controls historically is widespread, steady, and lackluster. Tight controls on prices lead resources to be unused and production to be cut short. Widespread famines assure providers a steadfast demand for inferior services and prevent them from profiting by innovating or improving quality. Prices fixed by sanction lessen enticement for providers to cut costs and encourage them to seek profits by playing politics rather than by serving their customers. Whil...
... the consumer was demanding. With over production the consumer don’t purchase the items that was once in demand and Farmers over produce their products and those products are lowered once it hits the local super market.
For example, factory farming is very efficient. By using less space the farmer actually saves money when factory farming, making the profit from selling the produce greater. Also, factory farming allows development of hybrid plants that are disease resistant. By plants becoming disease resistant the animals that eat the plants are becoming less prone to disease. This then helps the consumer who eats the animal because they are eating disease resistant food that allows them to have a better percentage of not catching harmful diseases. Factory farming also helps lengthens food availability and shelf life. With factory farming increasing products’ shelf life the value if the product increases. Well as it is efficient it is also inexpensive for farmers to use. Being inexpensive helps the farmer and consumer because prices for the resources to produce and product itself becomes cheaper and more affordable to the public. Also, it allows both producer and consumer to gain financially and improves the economy. Since factory farming is less dependent on manual labor it frees farmers from labor restrictions, this allows farmers to afford to hire workers trained in specialized tasks which then help the farmer produce
The stock market plays a significant role in the health of the economy; the economy has to be strong for a country and its citizens to prosper. In 1929 over a period of two weeks 30 billion dollars disappeared from the U.S. economy, this was the event that started the greatest period of human hardship of the twentieth century known as the great depression. On October 19,1987 the Dow Jones industrial average plunged almost a third of its value. Many investors went completely bankrupt after one day of trading. Both of these crashes came without warning in booming markets are the currently booming markets heading for a collapse? The current market resembles both 1929 and1987 markets but there is a smaller possibility for collapse.
This essay will examine the concept of market failure and the measures that governments take remedy the failure of the market.
In micro-economics market failure is characterized by resource misallocation and subsequent Pareto inefficiency. Just as the invisible hand falters, so is the case that the unregulated markets are incapable of solving all economic problems. In laissez-faire economy, market models mainly monopolistic, perfect competition and oligopoly are expected to efficiently allocate resources for the “welfare benefit” of the society. However individualistic and selfish private interests divert the public benefits thereby prompting government intervention to correct the imperfection which may lead to disastrous economic impact. Although corrective intervention policies by government may not necessarily address the underlying imperfection induced by private sector inefficiency, it still becomes a necessary remedy to benefit the wider public if private entities are not allocating efficiency. Furthermore, as the largest contributor of the Gross Domestic Product, poor and untimely corrective measures could signal the failure of both the private and public interests. Effectiveness of the policies and mechanisms designed by the state in market intervention are fundamental in correcting any perceived market failure. Intervention however does not guarantee effective remedies expected by the economy and could lead to deeper market failures if the regulations “crowd out” the private sector but is the viable approach to address market failure.
Before the public choice era, a traditional economist would approach the analysis of public policy through the concept of Pareto optimality (Lemieux 2004). Pareto optimality is defined as an efficient allocation of resources, where there is no way to reallocate resources to benefit some individual without harming another individual (Edgar Browning & Jacquelene Browning 1994). However, market failures can cause an inefficient allocation of resources. A few illustrations that generally lead to market failures include externalities and public goods. Governmental intervention through the development of public policy is commonly used to correct for such market failures. Over time, studies on public policy lead to a change in the way economists evaluated
Therefore a free market is not desirable as maximizing their utility is priority. So government is expected to correct the market failure by choosing to char...
“Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surrounding into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.” (Polanyi pg 3-4)
As soon as the shift to a free trade regime appeared along with the competition with countries such as China and Indonesia the quick collapse of Bangladesh’s textile industry has been predicted. However, the opposite occurred. We can highlight three major reasons to explain what happened:
Market failure has become an increasingly important topic for students. In simple terms, market failure occurs when markets do not bring about economic efficiency. There is a clear economic case for government intervention in markets where some form of market failure is taking place. Government can justify this by saying that intervention is in the public interest.
The stock market is an essential part of a free-market economy, such as America’s. This is because it provides companies the capital they need in exchange for giving away small parts of ownership in their company to investors. The stock market works by letting different companies sell stocks to gain capital, meaning they sell shares of their company through an exchange system in order to make more money. Stocks represent a small amount of ownership in a company. The more stocks a person owns, the more ownership they have of that company. Stocks also represent shares in a company, which are equal parts in which the company’s capital is divided, entitling a shareholder to a portion of the company’s profits. Lastly, all of the buying and selling of stocks happens at an exchange. An exchange is a system or market in which stocks can be bought and sold within or between countries. All of these aspects together create the stock market.
What are the causes of the weak safety record of the Bangladesh garment industry? Do Western companies that import garments from Bangladesh bear any responsibility for what happened at the Rana Plaza and other workplace accidents? The causes of the weak safety record of the Bangladesh garment industry are because of Western companies that import garments from Bangladesh and the government. The government could utilize their power to improve the conditions in Bangladesh, but instead they sit around and do nothing about it. Additionally, Western companies and others like it that chose to conduct business with industries like in Bangladesh seek to produce their products effectively and efficiently. Therefore, poor work conditions should be expected because those companies should know the situation those industries is in because their country is poor. Nevertheless, Western company’s do bear responsibility for what happened at the Rana Plaza along with other workplace