 |
| Previous Image | Next Image |
| Description: Equity = fairness, equal distribution of income Efficiency= uneven distribution of income e.g. Maximizing output with a given amount of input. If the amount of out is more than then amount of the input then it’s efficient. Example: Total income in the economy= pie There are 4 individuals in the economy -> two really rich people (individual 1 and 2), individual 3 and 4 make less income. In the world we live in, free market system is an economy that consistent with efficiency (efficient not equity so people have incentive to be the best than they can be). The income distribution in free market system is skewed because the free market system allows the market to decide the prices of goods and services by way supply and demand, thereby reflecting individual preferences using direct resources. For example, consumers are free to make their economic and financial decisions, whereas suppliers offer their products and services based on demand. A free market like the United States regulates itself by allowing the firms to set their prices. Picture Stats: Views: 316 Filesize: 41.74kB Height: 635 Width: 1415 Source: https://biology-forums.com/index.php?action=gallery;sa=view;id=33149 |