direct state provision

Question 1

Describe direct state provision graph

Answer 1

1. The government may decide to provide a merit good by state provision especially if it is under consumed in the free market
2. This is shown by perfectly inelastic supply curve. S1 is fixed and Q1 is also fixed.
3. Demand curve slopes downwards to reflect, varying, willingness and ability to pay. (D1)
4. The product is provided free at the point of consumption.
5. For example, the NHS and education
6. Therefore, direct state provision can lead to a more socially optimal quantity of merit good such as healthcare.
7. However, if there is under funding from the government, some consumers passed a point of Q1 could be excluded from the free good.

Question 2

Government failure and real resource opportunity cost. Paragraph

Answer 2

1. However, what the government provides, involves a value judgement
2. For example, some decisions may require moral considerations.
3. consequently, there is the issue of equity versus efficiency to consider.
4. If a product is produced efficiently, there will be a low cost per unit with minimal waste of resources.
5. This is more likely to occur through the market price mechanism what consumers are forced to consider how to ration the income.
6. If government all the provides to those who don’t need, it can be a real resource opportunity cost to deploying factors of production
7. For example, state provision can we put to better use through Smith’s invisible hand and the market price mechanism.

Question 3

Market solutions, always outperform state provision

Answer 3

1. in some product markets, it is preferable to allocate resources through markets via the price mechanism to improve economic welfare to prevent over and under production and consumption.
2. Prices can act as a signal to whether scarcities and services, so it can signal where Resources are needed and whether they not needed.
3. in some industries, firms are forced to consider, promote innovation and distribution techniques
4. For example, firms did used smart phone applications to deliver goods and services to households, during 2020.
5. The price mechanism is it like to be effective in markets with high competition and information failure
6. However, these assumptions unlikely to be true in concentrated markets with more complex products and concentrated monopoly power.

Question 4

paragraphs you can talk about

Answer 4

-Government failure and real resource opportunity cost

-market solutions, always outperform state provision

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