Public Finance

4. What are externalities, and how do they typically affect the price of a good or service?

After reading this article, the author gave readers a bunch of ideas about the public policy field. The author illustrated the definition of public policy clearly, explained specifically the broad field of public policy, and absolutely brought out reliable theories. It is a very useful chapter for the novice of public policy or public administration. By all means, this article provides multidimensional fashions to analyze or determine the

Negative externalities are costs imposed upon an individual or group that is outside or external to a transaction.

The system of public financing is one in which public funds cover either some portion or all of the election costs associated with running for office. In return for the public’s financial support, the candidates are limited in the amount they can spend during their campaign (Primo and Milyo 2006a). This system is beneficial to all three branches of government, and is arguably most influential on non-legislative candidates. This is because, the size of these legislators suppresses the power of any single member, and compels interest groups to look elsewhere for major influence (Primo 2006).

In conclusion, the consumption of cars creates both positive and negative externalities. However the negative externalities it is more than its positive externalities so producers tend to overvalue and over produce. The government tries to intervene by imposing taxes on the production of cars. However this is not usually effective as the imposion of taxes depends on the elasticity of the product.The demand of cars is not price elastic.

Government intervention corrects market failure resulting in environmental sustainability and improved accessibility to services. Goods or services with negative externalities are market failures because the operation of the price mechanism

Negative externalities are detrimental third-party effects caused by the production and/or consumption of a good. A public good is a good provided free of charge to the consumer, by the government. A public good is non-excludable and non-rivalrous. A merit good is a good that gives positive externalities upon production and/or consumption. A merit good is non-excludable, yet rivalrous.

3. The government has many affects on the economic activity by regulation, trade agreements, and subsidies. Adopting different forms of regulation is healthy to push businesses to a certain standard but have unintended consequences. For example, having a regulation in a workplace that a certain amount of workers have to be ethnically diverse could force businesses to hire unfavorable candidates only to comply with a

Positive externality is the benefits that someone receives such as a college education and negative externality include noises from a loud party. In this article, however, the United Kingdom has announced their sugar tax in the form of a levy on sugary-drinks manufacturers. This policy is meant to correct the negative externality on sugary drinks by shifting the behavior of consumers, reduce sugar consumption and improving public health. Sugar could go hand in hand with alcohol and tobacco as a part of the government’s effort to combat health danger. Potentially, tax on negative externalities is intended to make consumers and producers pay the full social cost of the good. In result, this will create a more socially efficient outcome and avoid overconsumption, and people will not ignore the external costs. In the graph below, I have shown that the government have impose a tax on a good (sugary-drinks) and made the consumers pay the full social cost instead of just the market price. In result, the demand will decrease due to the higher tax and achieve a more socially efficient level of consumption while increasing revenues for the government. The free market price is at Q1 and P1 and the social efficient level is at Q2 (where social benefit cost = social marginal cost). The result of the tax having an effect on the increase of price on sugary drinks in the UK will reduce the quantity to

b) Distributive policies – the allocation of benefits or services, at no cost, to particular segments of the population—individuals, groups, companies, or communities. These benefits or services include subsidies, grants, loans, technical assistance, information (as on the weather), contracts, unemployment benefits, and river and harbor improvement actions. The cost of these benefits and services are paid from the public treasury, which means taxpayer generally.

A key concept in chapter three is externalities, the repercussions of one’s actions as a result of self-interest. One example that Wheelan gives is texting and driving. As a result of the deaths that people texting and driving cost, the government made a law in which the fine for texting and driving is extremely high, therefore mitigating the incentive to do such. Externalities can either be positive or negative. This concept easily affects economics by causing market failures when a price equilibrium does not account for all the externalities in a product. In addition, in the case where the externality is negative, the government actually makes sure to regulate negative externalities by creating barriers or laws and diverting resources to mitigate the harm.

1. Identify the various types of goods (private, public, and in between) involved in this case. What was the primary objective being sought, and how was it being financed? Explain the unintended consequences of the financing approach. Is that financing approach appropriate for the type of good involved?

increase on cost of flying. In the case of the EPA making trucks cost more by passing stricter

An externality is the gap between private cost and social cost of some behavior; individual or firms engaging in private behavior that has broader social consequences. The government is an important part of our society. Government has a crucial role of dealing with externalities. Taxing is a method they use to regulate externalities and promote good incentives. The government sets rules, defines and protects property rights. The federal government issues thousands of regulations every year on everything from groundwater contamination to poultry inspection.. In California, the local government have zoning laws that forbid private property owners from impinging on neighbors by constructing building that are unsafe or even ugly. Law also requires

The public expenditure issue may be analyzed by understanding and appreciating changing balance between three dominant economic philosophies both in the past and present. The three dominant economic philosophies are libertarian who believes in minimum government role in public expenditure and on the other hand the collectivist believe in fully government role and summarily rejecting supremacy of private interests. The neo-liberals take a stand which serves as a go between the two.