4 Case Study of Welfare Economics

https://www.youtube.com/watch?v=PHe0bXAIuk0&feature=youtu.be Solution of this video in the context of Bangladesh Don’t have debt faster than income A deficit occurs when spending exceeds income. The only way to recover the deficit is to financed by borrowing which results in debt. To compare our income with our borrowing we used debt income ratio. Debt income ratio is one of the way lenders measure their ability to make payments toward money that have borrowed. Debt/Income ratio is expressed as a percentage and is comprised of your total minimum monthly debt divided by gross monthly income. A low debt income ratio demonstrates a good balance between debt and income and vice versa. When the interest rate on existing debt is higher than the growth rate of income, the debt/income ratio will go up if the interest payment is financed by new borrowing. However, for the growth of an economy financially solvency requires real income growth rate be at least as high as the real debt interest rate. However, such problem can be solved if Bangladesh Bank let private banks to lend new borrowing to finance the interest payment is less than the existing debt times the growth rate of income or the new borrowing interest payment will be so low that debt/income ratio will remain unchanged. Hence, more people will be interested to borrow loan from banks which will make borrowers more credit worthy resulting in increase their investment. According, to the data, found people have more tendencies to withhold their loans. In this case, the government can set a high standard of punishment for such borrowers. Initially to reduce the ratio government might set goals like loan will only provide to a certain sector of production. Such as Readymade garments, Jute manufactures, Fish, shrimps and prawns and those which is boosting economic growth. Even government can give them some incentive for this sectors producer which might help to produce goods efficiently such as beside loans subsidies can be provided or free training center where they will be taught a new way of production or how they will use raw materials more effectively. Thus, this will lead to more money flow in an economy and eventually, growth rate will increase which will offset the debt level of an economy Don’t Have Income Rise Faster Then Productivity As we know if income rises faster than productivity then this is a big problem for the economy. We can control this thing by taking such a few measures. New technology can improve productivity in any firms. If any firm imposes new technology for production, then it will surely increase the productivity of the labor but won’t increase their income that much. Such as in RMG sector in Bangladesh, a firm can invest in new technology like new machinery which will boost the productivity of labor but the wage will remain fixed. Division of labor is another way to boost productivity faster than income. If we allocate the works in a firm accordingly labors skill, then it will eventually boost up the productivity. Such as in RMG if a labor is expert in just washing the cloths then the firm should assign that labor in washing section and if a labor is expert in sewing the cloths then the firm should assign that labor in sewing section and their wage will be remaining as before. By doing this the labors get flexibility in their working section and those labors productivity will be higher in a single day than other labors who are not expert in their assign section. Thus the division of labor is an important way to boost productivity faster than income. Giving regular breaks is also helpful to boosting productivity. If a worker continuously keeps doing his or her work, then the worker will eventually get fatigue or won’t have any incentive to do the work properly. If a firm gives his labors break once or twice a day, then their mind will be clear and they will feel relieved and they will continue to do their job more precisely or carefully. Do All That You Can to Raise Your Productivity There are several things that can be implemented in order to increase employee’s productivity. first of all, provide them with necessary training that will develop their task related skills. After their initial training, they should be encouraged to continue their skill development. There are a number of ways you can support employee development on a regular basis, such as mentoring, courses, workshops & seminars. Moreover, you can offer them new responsibilities that will allow employees to obtain additional skills and this way they can improve their efficiency & productivity. However, providing employees with responsibilities that match their skills can lead to increase labor efficiency thus productivity. Secondly, appreciating your employees is important. Recognizing your employee for a job that is carried out successfully will encourage them to continue increasing their productivity. The incentives that you can provide are the following: yearly bonus paid vacation and take them out for a meal. Thirdly, clear communication is the key to a productive workforce. For this reason, the employer should make sure to communicate clear expectations and responsibilities to the employee and hence the employer will be reworded with a productive workforce. Finally, the following aspects will help to increase employee productivity. Give each other feedback, praise them for their achievement, allow employees to take regular breaks to function better, have regular meetings & provide them with healthcare solutions such as insurance. Case Problem 1: Case 1: Ans 1: All externalities in the nature of public goods or bad is commonly accepted and occasionally argued in uncertain terms but never rigorously justified. An externality is defined to be a situation in which a private economy lacks sufficient incentives to create a potential market in some good and the nonexistence of the market results in loosen in Pareto Efficiency. To include both pecuniary a d nonpecuniary externalities, and its non-pecuniary externalities, and it is providing a key to determining the types of economic situations that are likely to lead to externalities. The situation from the case 1 implies the negative externalities. Because, after 2012 when Facebook introduced the advertisement it leads to drop in users. Thus, it shows all its spillover effect. Ans 2: It is likely that one will come to dominate other because monopoly is better than a duopoly. A situation in which a single company or group owns all or nearly all of the market for a given type of product or service. The power which a monopoly has to influence a market, by means such as setting the pricing structure or barring new entrants. Monopoly profit is larger than normal profit which a monopoly enjoys because of lack of competition. On the other hand, duopoly shows a situation in which two persons or companies control all the market in the supply of product. Thus, one dominate other because the monopoly has a larger profit than duopoly and its larger than normal profit. If a social media dominates another then: One winner →. Strategic planning for the winner →. Users choose not to support websites that they do not think useful → Lack of support for new websites comes off → Existing winner make the rules. So that, there is no chance but to get out the dominated website. Ans 3: We know that an externality is defined to be a situation in which a private economy lacks sufficient incentives to create a potential market to create some good and the non existence of the market results. The nature of the problem that undermined Myspace relative to Facebook is a negative externality. It is common because the same action was taken by Facebook in 2012 by introducing advertisement on their sites. Some observers warned that Facebook could go the way of Friendster. It has experienced a dramatic decline among younger users. At results, they have switched to other competitions like Instagram, Snapchat, Tinder etc. Case Problem 2: Case 2: Ans 2: Economics incentive is nothing but motivates you to behave in a certain way, while preferences are your needs, wants and desires. John Hume Economic Incentives: - Make money from legal trophy hunting. Use that money for conservation of many species and breeding Kenyan Rancher Incentives: - No trophy hunting because by the law of nature species will grow up and it will create a tourism opportunity for Kenya. (Kenya has 20% GDP growth by tourism.) Ans 3: Regulation: - Creating yearly quota. Such as, governments impose a fixed number for hunting. Hunting should be banned in the breeding season. Old animals can be killed for the sake of young animals. It is because, the purpose of the game and increases the number of wildlife. Case Problem 3: Case 3: Ans 1: Norway higher taxes: - - There is a little gap between income classes in Norway because of this taxation. The main purpose of this taxation is getting money from rich people and invest it in Education, Health, Transportations etc. public sectors. Govt. of Norway takes care of unemployed by this taxation system. Ensuring same services for all income class. Ans 2: Govt. paid health care in arguments for social care: - If you are employed, then govt. will take care of your health insurance in the USA. Where social care is for all. If you employed or unemployed in Scandinavian countries. So, people are tending to lazier. Where in the USA, if you are unemployed govt. will minimal its services to you but if you take any entrepreneurial activities the govt. will take care of your health care. Ans 3: If Norwegian health care was mean tested and there were higher taxes there would a little income left for Wiggo Dalemo. If something major happens to him than it wouldn’t be possible to bear the expense of heath care on his own.