Market Equilibrium and Government Intervention

1173 Words Oct 31st, 2010 5 Pages
Market Equilibrium & Government Intervention
CORE 001 INTRODUCTORY ECONOMICS GROUP 2 PROJECT REPORT

Prepared
for:
Prof
Tan
Swee
Liang


LYDIA LOW NGUYEN NHAT QUANG ZHANG HONG BRIEN KEITH SEAH

Case 1: Shortage of Civil Engineers in India This article highlights how India, the world’s new “high-tech” titan, is facing the problem of poor infrastructure due to a lack of civil engineers. Our group examined several factors that could have led to the shortage as well as analyzed the effects of government intervention in India’s labor market for civil engineers. Market Forces of Demand and Supply Firstly, the low entry salary of civil engineers makes the career unappealing, even to civil engineering graduates. The resulting shortage can
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In order to protect local producers and economy, the U.S sought to place a tariff on Chinese aluminum extrusion imports causing its price to rise. This would lead to less imports and a decrease in supply in the U.S. economy. This is shown by the leftward shift of the supply curve from SS2 to SS3 as shown in Figure 4.

Figure
4


Short-term Effects US suppliers are now better able to compete with the imports, ensuring a more efficient employment of US resources. Revenue from the tariff can also be channelled into other areas of the economy like healthcare and infrastructure. Long-term Effects Aluminium extrusions are often used as input components in products such as electronics and construction. As input prices rise, so do production costs, ceteris paribus. Higher production costs are ultimately borne by U.S. consumers as their real income and purchasing power decrease causing less people to be willing and able to purchase these products. Revenue collected from the tariff may be insufficient to offset these costs. Further Analysis If the US government does not impose the tariff, the lower production costs would benefit the U.S. economy. Real income and purchasing power in the U.S. economy would increase. Additionally, the products manufactured could be exported and sold back to China for a profit. Not imposing the tariff would also force the US aluminium industry to innovate and thus, lower its production costs. This would make
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