EconSec3.pptVIP

Outcome 3 (Section 3)Session 14-16Assessment of Outcome 3(Dec. 7-21) Session 14 Section 3 (Outcome 3) (p211-p293) The role of the government in the economy  Outlines of outcome 3 ■ The advantages of market economy (市场经济的优越性) ■ The market failure or market imperfection and the need for government intervention (市场的缺陷及政府干预的必要) ■ Government intervention instruments (政府干预的方法) 1 Fiscal policy (财政政策) (Government spending taxation) 2 Monetary policy (货币政策) (Instruments and the central bank) 3 Supply side policies (供给学派经济学政策) 4 Government Regulation (政府法规) ● Competition policy (竞争政策) ● Environmental policy (环境保护政策) ● Transport policy (交通政策) ● Public ownership of industry (产业的公共所有) ● Welfare policy (社会福利政策) The writing of Adam Smith A Scottish philosopher. 1776 first highlighted the advantage of the free market system. Adam Smith believed that ●The society would be better off if everyone pursued his own self-interests. ●It was as if an ‘invisible hand’ directed theaffairs of individuals toward a common goal. Free market system is an “invisible hand”  (市场经济体系是一支看不见的手)(Adam Smith, 1776) ■ Advantages of the market system  (市场经济体系的优越性 ) ● The price system is efficient in making economic decisions on the uses of resources (市场经济体系有效地作使用资源的经济决策) ○Thousand people to cooperate in making economic decisions ○ Freedom in decision-making process ● The price system transmits information to buyers and sellers (价格体系传导信息给买方和卖方) ● Competition forces businesses to adopt the least costly and most efficient means of production (竞争迫使企业采用成本最低的, 最有效的方式进行生产) ■ The market failure or market imperfection and the need for government intervention (市场的缺陷及政府干预的必要) , p216-221 (!) ● Restricted competition There is a single or a few very dominant suppliers (when one firm has a large degree of market power, the Government is likely to intervene )