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Chapter 3: Q.50 (page 79)

Explain why voluntary transactions improve social welfare.

Short Answer

Expert verified

Voluntary transactions benefit both buyers and sellers after the transaction is completed.

Step by step solution

01

Definition

Social Welfare: Social welfare refers to a variety of support programs designed to promote a state's people's overall well-being by providing high-quality care to individuals and society as a whole. A good program investigates the problems of the population first, then proposes answers to the problems revealed in the study dynamics. The government of the United States has a number of programs and policies in place to assist persons who are poor.

02

Explanation

Voluntary transactions promote societal welfare by allowing sellers and buyers to freely participate in the market. Voluntary transactions allow the consumer's desire to shine through because they have the option to accept or refuse the transaction. Voluntary transactions also give sellers the option to refuse transactions if they so desire. As a result, voluntary transactions boost social welfare by putting both the seller and the buyer in a better position following the transaction.

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Most popular questions from this chapter

Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.

a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.

b. The winter is exceptionally cold.

c. A major discovery of new oil is made off the coast of Norway.

d. The economies of some major oil-using nations, like Japan, slow down.

e. A war in the Middle East disrupts oil-pumping schedules.

f. Landlords install additional insulation in buildings.

g. The price of solar energy falls dramatically.

h. Chemical companies invent a new, popular kind of plastic made from oil

How can you locate the equilibrium point on a demand and supply graph?

If the price is above the equilibrium level, would you predict a surplus or a shortage? If the price is below the equilibrium level, would you predict a surplus or a shortage? Why?

In an analysis of the market for paint, an economist discovers the facts listed below. State whether each of these changes will affect supply or demand, and in what direction.

a. There have recently been some important cost-saving inventions in the technology for making paint.

b. Paint is lasting longer, so that property owners need not repaint as often.

c. Because of severe hailstorms, many people need to repaint now.

d. The hailstorms damaged several factories that make paint, forcing them to close down for several months.

Let's think about the market for air travel. From August 2014 to January 2015, the price of jet fuel increased roughly 47%. Using the four-step analysis, how do you think this fuel price increase affected the equilibrium price and quantity of air travel?
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