GI- State Provision Flashcards
What is state provision
When the government supplies goods and services such as education, health and housing
What are public services
Products society believes should be provided to all consumers regardless of income e.g. Education and fire fighting
How does the state provide public services
Public services are provided by the government either directly through the public sector or by the state paying private sector firms
How are state provided gods and services financed
The cost of providing public services is finance through taxation e.g. Vat taxpayers indirectly fund state spending on e.g. NHS
Why does the state provide services
Governments provide items they feel free markets will either fail to supply at all (public goods) or produce in insufficient amounts: (merit goods and quasi public goods)
Identify factors influencing the extent of state provision
The amount of state provision depends on the extent of perceived market failure, tax revenues and cost of production
How is socially optimum level of output for a state provided product decided?
There are no markets for public or merit goods to reveal the actual value consumer place on private benefit. The state has to estimate and place a monetary value on: -the extent to which consumers undervalue the private benefits of a merit good
-the value of external benefits generated by positive externalities
How can the government arrange production of state provision
Government can provide free or nearly free merit goods to consumers:
- itself e.g. By building state schools
- via state owned public corporations or nationalised industries
- paying private sector firms to provide gov funded services e.g. Paying BUPA rather than the NHS
Outline productive efficiency issues associated with state provision
State run organisations are monopolists and face minimal competition. There is little incentive to be productively efficient or exploit consumers by charging high prices.
