What Causes Market Inefficiency (microeconomics) Assignment

What Causes Market Inefficiency (microeconomics) - Assignment Example Market failures, like most market functions, are about information. Markets work the best when they use prices to signal information to producers and consumers the social cost of an item, and allow them to choose among the best options using this information. When markets cant do so, they fail. One of the worst types of market failure is the externality. â€Å"An externality is an impact of an economic transaction that falls on someone outside the transaction. The nice smell of your neighbors barbecue is an example of a positive externality, and your insomnia when he buys new sub-woofers would be a negative one. These externalities are treated as rare occurrences in economic theory, but the reality is that external effects of our actions are everywhere† (Larson, 2009). Externalities in conventional economic theory are treated as a problem because they prevent producers and consumers from making efficient decisions: If a product made with more pollution costs less, then the society has to pay for pollution. But externalities have all sorts of other impacts. Financial externalities are to blame for the current meltdown: Companies like AIG externalized risk onto the rest of the economy. Global warming, pollution, habitat loss, species extinction, deforestation, and ind ustrial accidents hurting workers are all examples of externalities. Externalities, unfortunately, have an almost infinite number of sources. Any market that involves industrial production, for example, can have pollution as an externality. The same thing is true of any agricultural market that uses deforestation as a mechanism to gain real estate. If it is cheaper to overwork workers, or have them in unsafe conditions, even considering legal liability, then unsafe working conditions will be an externality caused by the expensiveness of safety mechanisms. And some industries make extensive money off of

Research report Essay Example | Topics and Well Written Essays - 2500 words - 1

Research report - Essay Example t also enables companies to cater to the increasing and incessantly changing demands of customers and therefore is considered as a fundamental element of client relationship tactic (Christopher, 2012). It allows managers to make sure that products are being delivered to customers at the right time, place and quantity. They always seek the opportunity to expand their business to those companies that offer them with cheaper source of labour and raw materials in order to decrease their raw materials (Prater, Biehl and Smith, 2001). In addition, their move to expand into a different country is also driven by their urge to cover a greater market (Gunasekaran, Patel and McGaughey, 2004). It is with regards to this fact that the researcher will be reviewing the case of Rolls Royce strategy to choose Singapore as its manufacturing location. This study is inspired by an article published in the Financial Times written by Grant (2014) titled â€Å"Aerospace manufacturers head to Singapore innovation hub.† In this study the researcher will be providing an in-depth explanation of the factors that has driven this move by Rolls Royce managers to shift its manufacturing base to Singapore. The researcher will also be emphasizing on the risks and challenges that needs to be considered by the managers of the company in order to improve its global supply chain performance. Finally, the researcher will be endeavouring to recommend certain strategies that can be implemented by Rolls Royce managers in order to tackle the potential challenges and risks in the company’s international supply chain. Rolls Royce’s decision to shift its manufacturing division to Singapore was driven by a number of reasons associated with the requirement to bring down cost of sales, increase operational and supply chain frequency and meet the growing demand of its customer base. First of all the corporate tax rate is considerably lower in Singapore (17%) (Grant, 2014) when compared to the rate that is