ssef5a. explain why the gov’t provides public goods and services, redistributes income, protects...
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STANDARD SSEF5a. Explain why the gov’t provides
public goods and services, redistributes income, protects private property rights, and resolves market failures.
SSEF5b. Give Examples of gov’t regulation and deregulation and its effects on consumers and producers
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ROLE OF THE GOVERNMENT IN A MIXED-MARKET ECONOMY:
Provide public goods and services
Redistribute income
Protect private property rights
Resolve market failures
Maintain Competition
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PUBLIC GOODS AND SERVICES
Public goods and services: provided by the government when the private market is unable or unwilling to produce the good.
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2 CHARACTERISTIC OF A PUBLIC GOOD
Shared Consumption: The consumption of
the good by one person does not diminish the satisfaction by another person who consumes the exact same good.
Example: Interstates
Non-Exclusion: It is nearly
impossible to keep a person who is unwilling to pay from enjoying the benefits of the public good.
Example: National defense
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EXAMPLES OF PUBLIC G & S
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REDISTRIBUTION OF INCOME Redistribution of income:
taking tax money from those who make a higher income and giving it to lower income citizens through transfer payments.
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REDISTRIBUTION OF INCOME Transfer Payments:
a payment made to individuals by the federal government through various social benefit programs.
Payments subsidize the income of recipients to allow the consumption of necessities.
Examples:WelfareSocial SecurityFood StampsMedicaid/Medicare
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PROTECT PRIVATE PROPERTY Private Property Rights:
Laws created by governments that regulates how individuals can control, benefit from and transfer property.
Essential in a market or mixed-market economy Businesses will not expand or invest
without rights to their own property. Includes intellectual property such as:
Copyrights Patents Legal documents (real estate, cars, etc.)
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MARKET FAILURE Market Failure:
Occurs when the private market is unable to produce goods or services in a way that the benefits society
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MARKET FAILURE A market failure can happen
when (there is):1. Inadequate Competition
(businesses have to much “market power”)
2. Buyers and sellers are NOT well informed
3. Resources do not move easily from one industry to another
4. Unreasonable Prices5. Externalities
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CORRECTING MARKET FAILURES
Externalities – when a third party benefits or is hurt from the production or consumption of a good or service.
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EXTERNALITIES: Positive Externalities – when a
third-party benefits from the production or consumption of a good/service.Example: your new college roommate
plays their iPod full o fall your favorite songs. You enjoy it even though you didn’t have to pay for it.
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EXTERNALITIES: Negative Externality – when a third
party is harmed by the production or consumption of a good/service.
Example: industries that cause air pollution during the production of a good or service.
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MARKET POWER: MAINTAINING COMPETITION Market power refers to a market
failure resulting from the formation of monopoly or oligopoly market structures.
Monopoly: One sellerOligopoly: Few sellers
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MARKET POWER: MAINTAINING COMPETITION The government uses regulation
and deregulation to make sure industries stay competitive.
Regulation-tighter restrictions and rules companies must follow
Deregulation- relaxing rules and laws companies must follow
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EXAMPLES
Regulation Deregulation
FDA-food and drug safety
EPA- environmental safety
FDIC- protection within the banking system
18th Amendment Banks (re-regulated
in early 2000’s)
Phone Companies Banks (deregulated
in 1980’s) Airlines 21st Amendment
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PUBLIC OR PRIVATE GOOD?
Activity:
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PUBLIC OF PRIVATE GOOD?Make this chart on your paper:
Cannot Share Consumption
Shared Consumption
Can Be Excluded
Cannot Be Excluded
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PLACE THE FOLLOWING ITEMS IN THE GRID:
A. College education
B. Electric powerC. HaircutD. National
DefenseE. Six FlagsF. Mosquito
treatmentG. Cable televisionH. Canine rabies
shot
I. Street lightsJ. Panama CanalK. Public toll roadsL. Police
protectionM. Health careN. National forest
campgroundO. Potato ChipP. Auto airbags
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GO TO FLIPCHART: