For example, if apple prices are higher than orange prices, consumers are likely to buy more oranges, since the fruits are virtually substitute goods for one another. So long as the apple growers can still make a profit, they will very likely lower their prices to meet consumer demand, until demand for apples increases again. Another example is that of gas prices. While gas 'gouging' certainly exists, it is difficult for one gas station to have prohibitively high costs for its product than other nearby suppliers, given that consumers will vote with their dollars and go to the more inexpensive station right down the highway.

Fully explain what is meant by the concept of transfer payments and how the government uses transfer payments to redistribute income in society. Give a concrete example of how the government is doing this.

Transfer payments are often thought of as the government taxing the...
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