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ANNUITY: The receipt of payments at regular intervals from a established fund. Annuities are commonly used for insurance and retirement programs. It works in this way: A fund, which can be established either through a one-time sum of money or a series of payments, is exhausted over time with fixed, periodic payments. The amount of each payment depends on the interest accrued on the outstanding balance in the fund, and the length of time scheduled to exhaust the fund. For example, if your pension plan is based on an annuity that begins payments at the age of 65, then the size of the payments depends on whether you expect to live 5, 10, 15, or more years and set up payments accordingly. It's very similar to amortization, but in the reverse direction.
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                           INEFFICIENT: The state of resource allocation that exists when the highest level of consumer satisfaction is not achieved from available resources. This state occurs in market exchanges if the price buyers are willing and able to pay for a good does not reflect the satisfaction everyone obtains from the consuming the good or if the price sellers need to charge for a good does not reflect all opportunity cost of producing the good. An inefficient state of resource allocation means that society is not doing the best it can to address the scarcity problem. Available resources are not used to achieve the greatest possible satisfaction of wants and needs. Inefficient MarketsAn inefficient state occurs if the highest level of consumer satisfaction is not achieved from available resources. A market exchange achieves an inefficient state if the demand price does not reflect the satisfaction everyone obtains from consuming the good or if the supply price does not reflect all opportunity cost of producing the good.Under these circumstances, a market equilibrium equality between demand price and supply price does not achieve an efficient equality between the value (satisfaction) of the good produced and the value (satisfaction) of other goods foregone. Satisfaction can be increased by producing more of one good and less of another. EfficientIn contrast, a market exchange achieves an efficient state if the demand price reflects the satisfaction everyone obtains from consuming the good and the supply price reflects all opportunity cost of producing the good, that is, the satisfaction foregone.Market equilibrium, with equality between demand price and supply price, means the satisfaction obtained from the good is equal to the opportunity cost of production. In other words, the value (satisfaction) of the good produced is the same as the value (satisfaction) of other goods foregone. Satisfaction cannot be increased by producing more of one good and less of another. Markets and GovernmentThe two primary methods of resource allocation--markets and government--are also the two primary reasons for an inefficient allocation.- Markets: Markets can be inefficient "naturally," with no help from government, due to market failures. The primary market failures are public goods, market control, externalities, and imperfect information. In each of these cases, the "natural" market equilibrium equality between demand price and supply price does not generate an equality between the value of the good produced and the value of other goods not produced.
- Government: Governments can cause an otherwise efficient market to be inefficient through price controls and taxes. Price controls force prices above (price floor) or below (price ceiling) the equilibrium price. Taxes create a wedge between the demand price and the supply price. In each of these cases, the market is unable to achieve an equality between the demand price and supply price, and thus there is no equality between the value of the good produced and the value of other goods not produced.
Recommended Citation:INEFFICIENT, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: February 4, 2023].
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PINK FADFLY
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Today, you are likely to spend a great deal of time at a going out of business sale hoping to buy either a printer that works with your stockpile of ink cartridges or income tax software. Be on the lookout for door-to-door salesmen.
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The Dow Jones family of stock market price indexes began with a simple average of 11 stock prices in 1884.
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"The greater danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it." -- Michelangelo Buonarroti, Painter and Sculptor
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APR
Annual Percentage Rate
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