Identify the Sector Where You are Considering for the Policy Intervention - Economics Assignment Help

Assignment Task:

Task:

1. Step 1. Identify the sector where you are considering for the policy intervention.

2. Step 2. There are several economic agents in the sector. Who are the economic agents that you wish to cover? Identify them.

3. Step 3. Identify the transactions that you want to be the centrepiece of your policy initiative.

4. Step 4. Can you think about the dynamics of a demand and a supply for the transactions?

5. Step 5. In a base economy setting, how would these transactions play out? What are demand side constraints if any? What are the supply side constraints?

6. Step 6. In a base economy setting, what is the equilibrium price and quantity at a given point in time? When the external environment changes, how do these price and quantity pairs move?

2. Professor also recommends to read and rethink the material in Chapters 4,5,6 of the Mankiw textbook. Those chapters have the tools to play these problems out.

3. All these should become the analytical setting within which one can then ask:

A. If this is what happens, then what is pareto optimal compared to this?

B. Once you have found out what is the pareto optimal outcome, you will be able to design how to go from where the base economy is towards pareto optimality. (If you can't get pareto optimality, you will need to justify what other outcome you want to achieve.)

C. Once you have identified the gap between where the economy is and where you think it ought to be, you will be able to pick the correct instrument / mechanism (it could be a quantity-based mechanism which will have the benefit of the market remaining free to tell you the adjustment price).

D. If you have a good narrative that fits in the above lists, you will have built your analytical framework within which you can explain what the intervention will (or will not) achieve.

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