The Role of Economics in Shaping Public Policy

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The Role of Economics in Shaping Public Policy

Introduction

Economics is essential in steering public discussions about business taxation, household taxation, and import taxation by changing the public perspective of taxes. Taxes are essential in running a government by providing public resources and services for appropriate economic growth (Korenik & Wgrzyn, 2020). Without taxes, the government would be unable to pay public servants and initiate projects in a country. Thus, economics enables people to understand how these public resources help shape their lives, hence enhancing their willingness to pay taxes.

Discussion

Concerning household taxation, economics gives the public reasons why they have to pay household tax hence changing their view on this tax. For instance, household taxes help to ensure that the government can protect land rates. As an economist, I should ensure that people pay household taxes so that the government can have money to finance and protect the property. Business taxation is essential in shaping the general economy of a country in the short and long run (Korenik & Wgrzyn, 2020). Thus, businesses should pay this tax to ensure that the country achieves economic growth, which in turn helps them grow. For instance, when a certain industry contributes more to taxation, the government may seek to streamline its business operations and make it prosper. Thus, as an economist, I would encourage businesses to consider paying taxes and not evading them because it shapes their industry and the economy, which determines their growth.

Import taxation is put by the government to ensure that it motivates people to buy products within the country. Thus, this tax helps to bring more income to the people hence stirring public discussion (Korenik & Wgrzyn, 2020). An example, if there are low import taxes on raw materials and high import taxes on manufactured goods; it is an indication that the government is encouraging people to manufacture products locally. As an economist, I would advise that people adapt to government import taxes and get the deeper meaning of the taxes to grow the economy.

Factors of Production

The Federal Highway Act of 1956 authorized the government to build 41,000 miles of interstate highways in the US. In addition, the government set aside $26 billion, which could be used to construct these roads (Brinkman & Lin, 2020). This allowed for two production factors, innovation, and physical capital, to increase. Innovation in the country increased because road network construction required engineers and other stakeholders to develop innovative integrated ideas for constructing the roads. The $26 billion set aside was significant in increasing physical capital because it provided job opportunities for people working on the construction sites.

Examples of economic concentration in the US include the search engines where Yahoo, Google, and Microsoft have dominated the market. Another example is the soda industry, whereby Coca-Cola, Pepsi, and Dr. Pepper Snapple Group dominate the market. Satellite TV providers have economic concentration, too, with the major players being DirectTV and Dish Network. The benefits of economic concentration are mostly on the consumer because they get products at a decreased cost per unit (Cortés et al., 2021). However, economic concentration creates a risk of market liquidity where large investment portfolios may face challenges in purchasing or liquidating assets (Cortés et al., 2021). The other risk is the credit risk, whereby when a default occurs in a debtor, it may be ruinous because there is a lack of diversification.

Conclusion

Economic concentration has affected the finance docket by having a few major players, such as banks taking a significant portion of consumers. However, with the introduction of fintech, financial assets have been diversified, which is healthy for the industry.

References

Brinkman, J., & Lin, J. (2020). Early interstate policy and its effects on central cities. Cityscape, 22(2), 8186. Web.

Cortés, L. M., Lozada, J. M., & Perote, J. (2021). Firm size and economic concentration: An analysis from a lognormal expansion. PLOS ONE, 16(7), e0254487. Web.

Korenik, D., & Wgrzyn, M. (2020). Public policy timing in a sustainable approach to shaping public policy. Sustainability, 12(7), 2677. Web.

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