Are the concepts of equity and efficiency different? Why or why not?
What will be an ideal response?
Yes, the concepts of equity and efficiency are different. Equity focuses on the distributive aspect of resources across society. Hence, equity is more concerned with how the pie is allocated to various economic agents.
An economy is said to be efficient when waste of resources is eliminated and social surplus is maximized. Thus, efficiency relates to making the societal pie as large as possible.
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With a large and growing deficit, the Fed may face pressure from the government to
A) decrease the inflation tax. B) decrease the quantity of money to keep the value of money high. C) keep interest rates low, but the Fed risks inflation by doing so. D) increase the velocity of circulation. E) increase the quantity of money to prevent inflation.
If the government subsidizes an activity it believes is generates a positive externality and it really only produces an inframarginal positive externality then the subsidization will result in an overproduction of the activity in question
a. True b. False
Production and exchange depend on an reliable infrastructure of
a. transportation b. communication c. sanitation d. electricity e. All of the answers are correct
When there is an excess demand of a product in an unregulated market, the tendency is for
A. price to rise. B. quantity demanded to increase. C. quantity supplied to decrease. D. price to decrease.