museums 2014
DESCRIPTION
presentation on positive externalitiesTRANSCRIPT
Should Governments
subsidise Museums?
BrainBlast Reasons why they should and reasons why they
should spend on different services
LO: to be able to make a judgement on government
intervention
Bee Keeping
1. Explain why Bee-Keeping has positive externalities.
2.Should the government have Bee-Keepers as public sector workers?
3.What would be the implications if they did
Should Governments
subsidise Museums?
Positive Externalities
Are those benefits that are external to an exchange. They are third party effects ignored by the price mechanism.
With positive externalities, less is produced and consumed than the socially optimal level.
In this case: …..The positive externalities
are the benefits that are external to the exchange of the museums educational service, which are third party effects ignored by the market forces.
Public Good
• Quasi- Public Good• Non-Rivalry• Non-Excludability• No free rider problem
Marginal Private Benefits…
In a free market: consumer’s only have concern about the private benefits and private costs from consuming a good or service.
The price they are willing to pay reflects/shows the magnitude of the benefit.
For a museum that will only be sales revenue from products, to commemorate/recall the history displayed.
Marginal Social Benefits…
MPB + External Benefit = Social Benefits
External Benefit = Private Benefits – Social Benefits ( difference between on a graph)
External Benefits increase disproportionally with output consumed (when MPB and MSB diverge at y-axis on graph)
Essential learning from history
External Benefits from consumption
So we should subsidise
Museums…• This is because….– Supply of Museum’s is
inelastic SO…– Increase consumption of
good/service– Therefore there is an
increase in the benefit to society
– Diagram: Triangle of welfare gain increases
– Price Social Optimum is Reached and
Quantity/Output Social Optimum is Reached
It depends on: the magnitude of the subsidy
Advertising could be used instead to promote Museums
Only if Ceteris Paribus is in place
Something we haven't done
Merit Goods and Demerit Goods:
• Under produced and Under consumed
e.g. Healthcare and Education
• Over produced and Over consumed
e.g. Tobacco, Alcohol and Gambling
Merit Good- a good that brings unanticipated benefits to its consumers, such that society believes that it should be consumed by individuals regardless of whether they have the means or the willingness to do so.
Museums:
Game
• Either: – I went to the museum and
learnt..– I went to the museum and
bought a...– I went to the museum and
had a positive externality of…– I went to the museum and
had a private benefit of…– A Museum itself might have
an increased _______________once it was subsidised
– Name a merit good…– Name a public good…– Draw a positive externality
graph
HWon
inspiringeconomics.blogspot.com
June 2014 unit 1 – question 9(e)