Topic 6 - Government and the Economy Flashcards
Give 2 examples of of Government Business Enterprises which have been privatised?
Commonwealth Bank and Qantas
What are merit goods?
Merit goods are generally excludable and rival but not produced in sufficient quantities by the free market
How does market failure occur in a free market system in regards to the provision of goods and services?
When markets may not produce goods or services demanded by society and may produce insufficient quantity at acceptable price
How does the government provide merit goods?
-Indirectly through subsidies (financial support) e.g. arts
-Directly through operation e.g. healthcare systems, libraries, and education
What are demerit goods?
Demerit goods are considered as “bad” for you which can lead to negative externalities.
What is a non- rival public good?
When the consumption of a public good by one customer does not restrict consumption for other customers, e.g. your access to the internet does not affect someone else’s access to the internet
What is a free rider?
A free rider is an individual, household, or firm that benefits from a good or service without paying for a share of the cost e.g. people who avoid taxes still benefit from defence and street lighting, although this can lead to the under-provision of goods and thus market failure
How does the government intervene in the market for demerit goods?
- Imposing taxes on producers or consumers e.g. tobacco
- Prohibition e.g. illicit drugs
- Restricting production and consumption e.g. retailers fined or selling demerit goods to people under age of 18
What are other functions of the Government?
Ensuring workable competition in the market, consumer protection, environmental protection, and labour market policies.
Income distribution
In a market economy an individual’s ability to consume goods and services depends on his/her income resulting in an unsatisfactory allocation of resources.
What are non-excludable public goods?
Non-excludable goods are products that cannot exclude a certain individual or group of individuals from using them. E.g A public road is a non-excludable good, everyone has access to a public road.
