Y1 32.5 State Provision

Question 1

What is state provision?

Answer 1

Government directs provision of goods at point of consumption for merit goods and public goods

Question 2

What is state provision

Answer 2

Government directs good provision at point of consumption for merit goods and public goods

Question 3

State provision explanation

Answer 3

S1 vertical due to fixed government budget
Government knows SC and SB, allocate at Q*
Free at point of consumption
Solves externality & inequality
Missing market solved
Welfare mat, allocative efficiency

Question 4

State provision Cons

Answer 4

Excess demand: no price rationing, long queues, decisions based on severity, argue functioning private sector alleviates issues

Extreme cost: Gov. takes whole market, increased debt, tax increase, LR funding, austerity cuts

Imperfect info: Q* not likely know, gov failure if too high, too low excess demand increase

Inefficiency: State run have no profit motive, private sector does