Answer to Question #173155 in Macroeconomics for Nana Fosu

Question

 

1. if you are an analyst at the ministry of transport and the minister proposes that the toll of 50p would now be 1.00ghc and the elasticity of demand for the motorway is 0.3. Do you think this is politically a good decision?

2. Do you think the price support system would help farmers in Ghana?

3. Explain the concept of market failure.

Answer 1

1.Yes since the increase in quantity of goods is almost directly proportional to the price change.

2.Yes since it helps to set a floor price scheme, whereby the government ensures that the producer price does not fall making the farmers to have the morale of producing more since there is an assurance of stable prices.

3.Market failure is a situation whereby there is an inefficient distribution of goods and services in the free market.Market failure is an economic situation where the individual incentives for rational behavior do not lead to rational outcomes for the group.