The Role of Welfare Economics

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Firstly, I want to say, that welfare economics is a normative branch of economic theory. Welfare economics does not merely look at the economic or financial choices of the population. It also looks at the moral and social preferences of the society as having economic value. The purpose of welfare economics is to bring economics into the whole of social life, reflecting the values of the social whole. Economics, in other words, deals with the “total good” of social life.

So lets think How prices can affect the welfare of society? We can explain it by the law of demand. If something becomes more expensive, which means that the cost of living becomes higher, we will have less money available to spend on our other needs. If the product or service is not necessary, we will decide to buy less of it. The changeable situation on the market cause social inequality and unfair distribution between individuals. However, there are many ways to fix the inequity and the main one is taxation. The primary purpose of taxation is to raise revenue for the government, although the government does use taxes to promote beneficial activities, such as starting a business or getting an education, or to limit undesirable behavior, such as smoking and drinking alcoholic beverages.

To sum up we should realize the importance of understanding how welfare economics affects our lifes. Due to the concept of welfare economics there is a big scope for ideas of fairness in society to prosper
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