Imagine that during time of war, the government imposes coupon rationing. What are the advantages of allowing people to buy and sell their coupons? What are the disadvantages?
2006-12-26 21:56:58 · 1 answers · asked by Kwan2007 1 in Social Science ➔ Economics
The advantage from an economics point of view is that by buying and selling coupons, people have more freedom of choice and hence are able to reach higher utility levels than without this freedom. Say everyone receives coupons for one kilogram of flour and one liter of milk but not everyone needs that same amount. If your marginal utility from extra flour is higher than your marginal utility gained from flour, you could maximize your marginal utility by selling some of your milk coupons and buying some flour coupons, until your marginal utility of both products becomes equal.
In other words, trading coupons allows for more choice as to what to buy. People are able to buy more of what benefits them more (due to personal preferences) in exchange for buying less of what benefits them less. As a consequence, people benefit more overall.
2006-12-27 05:14:12 · answer #1 · answered by s 4 · 0⤊ 0⤋