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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?

- Directly
- 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?

Merit good


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


How do some regulations encourage renewable energy?

- Renewables Obligation Certificates encourage renewable energy
- Electricity suppliers often give minimum % of power that must be renewable
- Suppliers who fall short of % have to pay a fine
- Money from this gets shared between suppliers who meet target