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MARKET FAILURE AND GOVERNMENT INTERVENTIONS Allocative Efficiency and Market Failure
STARTER ,[object Object],[object Object],[object Object],[object Object]
PRODUCTION EFFICIENCY ,[object Object],Consumer  Goods Capital Goods
ALLOCATIVE EFFICIENCY ,[object Object],Consumer  Goods Capital Goods
PRODUCTION INEFFICIENCY ,[object Object],Consumer  Goods Capital Goods
CONDITIONS TO ACHIEVE ALLOCATIVE EFFICIENCY ,[object Object],[object Object]
[object Object],[object Object],CONDITIONS TO ACHIEVE ALLOCATIVE EFFICIENCY
[object Object],[object Object],[object Object],CONDITIONS TO ACHIEVE ALLOCATIVE EFFICIENCY
[object Object],[object Object],[object Object],[object Object],[object Object],CONDITIONS TO ACHIEVE ALLOCATIVE EFFICIENCY
Fair income distribution ,[object Object],[object Object],[object Object]
No externalities  ,[object Object],[object Object],Fishermen down stream Less congestion on the road for  everyone else.  Damage to  property Externality Cost to others Benefit to others Pollution in a river Courtney takes the bus to school Drinking alcohol
No Public Goods ,[object Object],[object Object],[object Object]
MARKET FAILURE ,[object Object],[object Object],Consumer  Goods Capital Goods
State Intervention MARKET FAILURE AND GOVERNMENT INTERVENTIONS
THE GOVERNMENT  ,[object Object]
ROLES OF THE GOVERNMENT ,[object Object],[object Object],[object Object],[object Object]
REGULATORY ROLE ,[object Object],[object Object]
ALLOCATIVE ROLE ,[object Object],[object Object]
DISTRIBUTIVE ROLE ,[object Object],[object Object]
STABILISATION ROLE ,[object Object],[object Object],[object Object]
GOVERNMENT INTERVENTION ,[object Object],[object Object],[object Object]
PRIVATE AND PUBLIC GOODS
PRIVATE GOODS ,[object Object],[object Object]
CHARACTERISTICS OF PRIVATE GOODS ,[object Object],[object Object],[object Object]
PUBLIC GOODS ,[object Object],[object Object],[object Object]
MIXED GOODS ,[object Object]
THE FREE RIDER PROBLEM  ,[object Object],[object Object]
SOLUTION  ,[object Object]
Hospital High School Police Army Roads Bridges Medical Drugs University Dentist Visits Navy  Air Force  Cycle Helmets  Cigarettes  McDonalds Net Ball Courts Gambling  Eye Examinations Seatbelts Cars with ASB breaks Snowboard Milk Recycling Plant Slippers Electric Blankets  Alcohol  Guns Cycle Ways Sports Stadiums Rubbish Collection Swimming Pools Park Street Lamp
MERIT GOODS ,[object Object],[object Object]
DEMERIT GOODS ,[object Object],[object Object]
Hospital High School Police Army Roads Bridges Medical Drugs University Dentist Visits Navy  Air Force  Cycle Helmets  Cigarettes  McDonalds Net Ball Courts Gambling  Eye Examinations Seatbelts Cars with ASB breaks Snowboard Milk Recycling Plant Slippers Electric Blankets  Alcohol  Guns Cycle Ways Sports Stadiums Rubbish Collection Swimming Pools Park Street Lamp
COLLECTIVE GOODS ,[object Object],[object Object],[object Object]
PRODUCTION POSSIBILITIES CURVE Private  goods Collective  goods A B
CHARGING FOR PUBLIC GOODS ,[object Object],[object Object],[object Object]
CHARGING FOR A PUBLIC GOOD MB Charge Price Welfare lost through charging  for public good. Capacity of the public good Quantity
TAXES AND SUBSIDIES ON GOODS.  ,[object Object]
TAX S D Quantity (000) Price ($) 0 10 20 30 40 50 70 80 60 10 20 30 40 50 S’
SUBSIDY S D Price ($) 0 10 20 30 40 50 70 80 60 10 20 30 40 50 Quantity (000) S’

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Market failure and government interventions slides

  • 1. MARKET FAILURE AND GOVERNMENT INTERVENTIONS Allocative Efficiency and Market Failure
  • 2.
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  • 14. State Intervention MARKET FAILURE AND GOVERNMENT INTERVENTIONS
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  • 29. Hospital High School Police Army Roads Bridges Medical Drugs University Dentist Visits Navy Air Force Cycle Helmets Cigarettes McDonalds Net Ball Courts Gambling Eye Examinations Seatbelts Cars with ASB breaks Snowboard Milk Recycling Plant Slippers Electric Blankets Alcohol Guns Cycle Ways Sports Stadiums Rubbish Collection Swimming Pools Park Street Lamp
  • 30.
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  • 32. Hospital High School Police Army Roads Bridges Medical Drugs University Dentist Visits Navy Air Force Cycle Helmets Cigarettes McDonalds Net Ball Courts Gambling Eye Examinations Seatbelts Cars with ASB breaks Snowboard Milk Recycling Plant Slippers Electric Blankets Alcohol Guns Cycle Ways Sports Stadiums Rubbish Collection Swimming Pools Park Street Lamp
  • 33.
  • 34. PRODUCTION POSSIBILITIES CURVE Private goods Collective goods A B
  • 35.
  • 36. CHARGING FOR A PUBLIC GOOD MB Charge Price Welfare lost through charging for public good. Capacity of the public good Quantity
  • 37.
  • 38. TAX S D Quantity (000) Price ($) 0 10 20 30 40 50 70 80 60 10 20 30 40 50 S’
  • 39. SUBSIDY S D Price ($) 0 10 20 30 40 50 70 80 60 10 20 30 40 50 Quantity (000) S’