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 wealthy to redistribute income to the poor. This concept is evident in how the U.S. government taxes wealthier individuals at a higher rate to pay for programs such as Medicare and Medicaid that provide services for the impoverished members of society. However, transfer payments also include other forms of money given by the government to its citizens, such as Social Security. In this program, younger individuals have money taken out of their paychecks to pay for aid for the retired elderly. Then, later on, according to the system, these same individuals will receive similar aid when they are retired, from other working young people ("Transfer payments," 2007, Investor Words). But the payment is in proportion to the money the worker 'pays in' to the system, in other words, how high his or her wages were while working, and how long he or she worked.
Other examples of transfer payments include unemployment compensation, where the unemployed receive benefits provided by working members of society. While they were working, or when they worked, they paid taxes to support this program, which exists as a way to keep all of society afloat, weak and strong. Welfare and disability payments are also transfer payments. Individuals pay for these programs through their taxes to support the ideal that society as a whole is stronger if people are not suffering. If people have some hope to better their futures...
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