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Four Chapter Of Retail Party Economics

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The final four chapters of Cocktail Party Economics focuses mainly on the economic concepts of market failure, efficiency and equity. Equity can be defined as the ownership in a company in the form of stocks or shares (Adomait and Maranta, 150) or as the concept that income and wealth is to be distributed in a fair manner (Adomait and Maranta, 110-111). Efficiency is described as a market with a market price that accurately reflects opportunity costs of buyers and sellers who know everything there is to know (Adomait and Maranta, 155). A market failure occurs when a market is unable to serve a society properly and they have failed to make the proper outcome
(Adomait and Maranta, 129). These three concepts are key in understanding economics …show more content…

If Canada imported all their agriculture needed, The producer surplus for Canada would get much smaller resulting in a lot of Canadian farmers unemployed. But since the Canadian government placed tariffs (negative tax) on imports for agriculture, farmers are promised job security. This is not done because it is most efficient, but is done since it is what is fair and supports equity. Also, the government’s intervention on agricultural markets affects efficiency because the government restricts trading so that they have a limited amount of goods produced. As a result, producer surplus is not as big as it could have been without the set restrictions meaning it is not at it’s most efficient point. An example of trade restrictions limiting production of goods is in the dairy market because in Canada, milk producers are given quotas which they cannot pass. As a result, the milk producers create a cartel; an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition(Adomait and Maranta 124). Cartels affect …show more content…

they are related to equity in terms of ownership because stocks are available to the public providing an initial public offering and continues to be released as secondary or seasoned offerings (Adomait and Maranta 150).
Because of this, a company can increase it’s equity by selling it’s ownership in the stock exchange market.(Adomait and Maranta 150). Also, financial markets have a lot to do with efficiency. When a financial market is efficient, no company has any absolute advantage, everybody involved should be knowledgable of everything here is to know because the prices should reflect the common knowledge available about the product(Adomait and Maranta 156).
An overall outlook on efficiency in financial markets can be defined as the correct goods being made for the correct people at the correct price(Adomait and Maranta 155). Market failure is highly related to financial markets because market failures happen in financial markets when the opportunity costs are strictly financial instead of also including personal preferences(Adomait and Maranta 155). Since firms tend to buy for cheap and sell for expensive, a spillover occurs(Adomait and Maranta 133). A spillover is an economic event in one context that

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