ECO 201 - Simulation Checkpoint Assignment

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Southern New Hampshire University *

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201

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Economics

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Feb 20, 2024

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Ronni Harker ECO – 201 Module Four Assignment Simulation Checkpoint Assignment Externalities with Policy Externalities without Policy Government Tools: The government has the ability to intervene in the market to address any market failures, including the following: making new laws, tariffs, and trade restrictions, among other things. The government protects justice, norms, the economy, balance for individuals, as well as acting as a buffer between consumers and markets. Upon many other measures at their disposal, the government needs to assist and balance its economy to improve people’s lives. Command and control policies deal directly with behaviors relating to prohibiting dumping of toxic chemicals into the water supply as well as EPA requirements to adopting particular technology in order to reduce emissions. Market based policies encourage places to address issues on their own utilizing Corrective Taxes and Subsidies or Tradeable Pollution Permits. The government can use corrective taxes to address negative externalities such as the EPA taxing a company based on the volume of pollution produced each year. The governement charging a corporation that annually

produces too much toxic waste and rewarding companies that produce less toxic waste in as example of Corrective Taxes and Subsidies. Supply and Demand Equilibrium: Government interventions can affect the supply and demand equilibrium by imposing price control measures or taxes. Price controls come in two different forms, price ceilings (maximum) and price floors (minimum). The determining factor of the impact that price control can have on a certain market depends on whether or not the control is above or below the equilibrium. The alternative method used by the government is taxes. Policymakers use taxes to raise revenue for public purposes and to influence market outcomes. During this weeks simulations there were some difference between the first and second games. During the Externalities with Policy I noticed it was much easier for me to propose a selling price and receive a bid worth accepting that was equal to or exceeds my asking price. On the second simulation it was much more difficult, I had to hike up my asking price because of the additional taxes added by the government, and consumers were not willing to pay my asking price which resulted in selling to the highest bidder and obtaining a loss. Consumer or Producer Surplus: The governments regulations can influence the consumer and producer surpluses of an economy in multiple different ways. A producer surplus is the difference between the price a seller receives for a good and the price the seller pays for providing the good. Price controls like price ceilings could essentially cause a consumer surplus because there is a limit on the maximum price of that good. In order for the government to maintain a healthy economy, price

ceilings and price floors prevents prices from rising too high or too low, which in turn establishes price equilibrium. References: Mankiw, N. G. (2024). Principles of Economics . Cengage.

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ECO 201 - Simulation Checkpoint Assignment

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