Answer to Question #316876 in Economics for Wajahat

Question

1. What is Government?

2. Who is Government?

3. What is the economic role of government?

4. Positive and Normative economics?

5. Pareto Effieciency?

6. Market Failure?

7. Equity and Efficiency?

Answer 1

Government is the political system by which a country or community is administered and regulated.

Governments provide the legal and social framework, maintain competition, provide public goods and services, redistribute income, correct for externalities, and stabilize the economy.

Economists frequently distinguish between 'positive' and 'normative' economics. Positive economics is concerned with the development and testing of positive statements about the world that are objective and verifiable. Normative statements derive from an opinion or a point of view.

Pareto efficiency, or Pareto optimality, is an economic state where resources cannot be reallocated to make one individual better off without making at least one individual worse off.

Market failure, in economics, is a situation defined by an inefficient distribution of goods and services in the free market. In market failure, the individual incentives for rational behavior do not lead to rational outcomes for the group.

The equity-efficiency tradeoff is when there is some conflict between maximizing pure economic efficiency and achieving other social goals. Most economic theory uses a utilitarian approach as its ethical framework, but this may conflict with other moral values that people hold, leading to an equity-efficiency tradeoff.