Flashcards in CGP test notes Deck (19):
NOTE FIRST 3 PAGES
What is state provision?
Where the gov provides certain goods or services
How can the government directly provide some goods and services?
- Use tax revenue to pay for goods/services -> Make free or largely free eg NHS
- Public goods are provided by state
What are the 2 ways the gov can provide state provision?
- Purchasing good from private sector and providing it for free
What 2 conditions must be satisfied for a good to be purely public?
Non excludable and non rivalrous
What 2 conditions must be satisfied for a good to be purely private?
Excludable and rivalrous
Give examples of state provision which has come directly from the government
State schools, army, NHS, police
Give examples of state provision which has been purchased from the private sector
Community health services
How can state provision help overcome market failure?
- Gov can provide things to increase merit good consumption
- Free provision of services reduces inequality
- Can redistribute income
- Level of state provision is a value judgement - how much should be provided -> how important good/service is for society
How does state provision help redistribute income?
Most money to pay for services comes from taxing wealthier people
What are disadvantages of state provision?
- Less incentive to operate efficiently -> Price mechanism
- May fail to respond to consumer demands -> Lacks motive of profit
- OC is goods/services that aren't provided
Can reduce individuals self reliance
What type of good is healthcare?
Why does the gov fund the NHS?
So society benefits from positive externalities and healthcare
What are the drawbacks for the state provision for the NHS?
- Demand for healthcare has increased massively -> Free at point of delivery -> Excess demand
- Hospitals + Clinics waste resources -> Unused prescriptions
- NHS may not always respond to patient wants
- NHS can reduce patient self reliance -> Remove incentive for patients to deal with themselves
What are the forms of government regulation?
- Bans and limits e.g on demerit goods
- Limit prices e.g on monopolies
- Provide consumer protection from asymmetric information
What is regulation?
Rules enforced by authority, backed up with legislation.
What does regulation allow the government to do in terms of producers?
Can control activities of producers -> Prevent undesirable activites
Why can regulation be difficult to set?
- Difficult to work out what to set
- Need for some regulation to be worldwide
- Excessive regulations are expensive -> Firms relocate
- Monitoring compliance of regulations is expensive
- Punishment for breaking regulation may not be harsh enough