State provision

Question 1

Why does the government provide it?

Answer 1

The government directly provides some goods and services (with positive externalities) to benefit society as a whole.

Question 2

What are the costs of State Provision?

Answer 2

• when a good is provided for free it may not be enough to satisfy demand–>excess demand
• oppurtunity cost
• Demand may rise at a faster rate than supply

Question 3

What are the Benefits?

Answer 3

• Services such as healthcare and education benefit whole of society-low income can access
• Healthcare means economys workforce can remain healthy and total output would not be affected.

Question 4

What impacts the effectiveness of a state provision?

Answer 4

• amount of money spent

- other measures may be more effective