Question

There are many difficulties facing governments of solving equity problems without negatively affecting efficiency (for example, inheritance taxes). Find another example that illustrates this point. Point out the efficiency and the equity implications.

Answer 1

Solving equity with affecting efficiency negatively is a crucial role of the government. When efficiency increase equity declines. Another example other than tax, when maximizing the productive efficiency of a market , it may lead to decline in equity depending on how balanced the wealth is distributed. Like the growing disparity of economic inequality within a country when there's GDP growth. It's like equity and efficiency are inversely proportional. Healthcare can be a great example. Efficiency in treatments with proper planning and operational practices can lead to remove negative healthcare facilities while this is may not be affordable to all due to the low income or equity available where government has to take the call to balance to provide the necessities to the economically poor class of the society