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Welfare Loss Microeconomics Homework Help

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Description Welfare Loss:

It should be very well known to all that the prices are very much important in deciding the goods that would come in to production.They prices are capable of carrying information and incentives for the agents or goods that are economic.


The term welfare loss would be the one that could be used when there is a loss in terms of the efficiency in the economy. This is very much possible in many cases.

If the government has to carry on with the various activities that it has to, then it must have resources too. The way to obtain resources in case of the government will be a little complicated. This is so because the private sector will have economic efficiency changes and also changes in the distribution in the income level. This will happen when government is collecting money from the private sector.


When there is collection of taxes that is from a price one party, then it will see a change in the transactions. It would see a different price from that of the other parties. This way there can be economic inefficiency and can lead to market failure. The taxations have an ability to change the incentives that are given to the people. This is the main reason as to how the economic efficiency is changing. Though the politicians may or may not understand the effects of taxes, the economists are fascinated with it. Let us see the efficiency implications in case of the excise tax.

The things that can possibly affect the rate of production in the market:

The economists consider that the prices are important in allocating of resources too. It is dependent on how the consumers want it, this means that the preferences from the consumer side will determine how much of that particular product will be manufactured for the market. Apart from it, there are the technological issues and the resources’ relative availability too that play a vital role.

One of the best examples would be dollar voting. There is proof through the dollar voting, that the consumers are the ones who decide who stays in the market for long and not the producers. This is known as the consumer sovereignty. This way the dollar voting is a great way of choosing your leader among the products that are widely spread in the market.