Many coal firms have been closing down as the global demand for the ‘black diamond’ has fallen considerably. The supply is higher than the demand, leading to continuous fall in price. The price of the output is inadequate to cover the cost of production. This means that the firms are not able to meet the marginal costs. The fall in demand for coal is attributed to the changing environmental regulations on pollution (Springfield, 1).
The conservative economic views require the government to empower the people so that they can solve their problem. Therefore, it is possible to take care of the poor people in a conservative economy. This is because the government will empower the poor with knowledge and skill that will help them work to achieve their goals (William, 12).
A conservative economy advocates for free market economy. It limits government intervention to control the market inefficiencies. The inefficiencies result in increased poverty of some people in the society as the rest get rich. To avoid the scenario, the government should intervene to solve the inequalities. This can be done by offering free education to the poor and cash transfers to the disadvantaged families.
Behavioral economics describes consumer as a rational being. The article articulates that a consumer considers costs and benefits before purchasing incommodity. A consumer purchases a commodity that will give the highest satisfaction. This explains why the demand and market fortunes for Kodak fell as demand for smart phones that are also used as camera increased (Economist, 1)
The utility derived out of consumption of a product fall as consumers consume more units of the product. This is diminishing marginal utility. Taxing product with elastic prices leads to increase in the market price of the product. However, tax on a product with inelastic prices doesn’t lead to increase in market prices. The manufacturer pays the tax on the product with the inelastic price. Sales tax harm industries selling commodities that have elastic demand. The harm comes because consumers buy fewer inventories when prices increase as a result of an increase in tax rate. However, increasing the tax rate on products with inelastic demand doesn’t affect firm’s profit.
References
Economist. "The Last Kodak Moment?" The Economist. The Economist Newspaper, 14 Jan.
2012. Web. 06 Sept. 2016. http://www.economist.com/node/21542796
Springfield, Cary. "The Decline in the US Coal Industry." International Banker RSS. N.p., 26 Apr. 2016. 06
Sept. 2016. http://internationalbanker.com/brokerage/decline-us-coal-industry/
William A. McEachern. Economics: A Contemporary Introduction. 10th ed. N.p.: n.p., 2014.
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