Need an Economics tutor?
Hire an Economics specialist to help you online.
Honest service. Affordable rates.
Contact us today about Economics tuition.
The state is at the core of economic life. The market leads innovation.
As mentioned in a previous post, the market and the government are like a yin and yang of economic life. They are both interdependent and complementary.
The government is at the heart of economic life in every free market economy. This is because it plays three specific roles:
1. Public procurement
The state buys goods and services e.g. building roads, hospitals, railways and schools. This has a knock-on effect of boosting competition among suppliers.
2. A legislative and executive power
The government is able to set the protocols of the economy by issuing permits and licences to trade. For example, to become a teacher one must earn a teaching qualification. To become an MD, one must attend medical school. The state assumes a role of the referee: an observer of the economy and an intervenor when suitable.
So, how does the market create innovation?
One issue is around affordability. Monopolies are the sole or dominant supplying force in a market, so they’re able to charge whatever they like. As a result, prices are higher and output is lower. This can reduce welfare for the rest of society.
With competition comes the need to convince customers to buy your products. People end up buying the products from suppliers who are more efficient in their production, and firms who supply the best products for welfare maximisation.
Competition drives innovation. Innovation can decrease your costs and it can also boost your sales if you can make better products.
But if you’re a supplier and you want to lower your prices, you’ll also have to find a way to lower your costs. Innovation and efficiency are the side effects of suppliers’ bid to offer competitive prices.
Want to pass your Economics exams?
Hire a specialist economics tutor today. At mrbanks.co.uk, we supply online Economics tuition to support you through your exams.
Online tuition provides so many benefits.
Save money. Save time. Improve your grades.
Want to try before you buy? Contact us to book a trial lesson. You can see if online Economics tuition is right for you.
Contact us today and book a trial lesson with an online Economics tutor.