Chapter 5, Problem 5.3SC

To determine

The functions of the government.

Concept Introduction:

Functions of the Government- The government performs six major functions as propagated by the economists in their theories towards growth, development, economic and social welfare. These are (1) stabilizing the economy combating effects of economic cycles and inflation/deflation/stagflation etc, (2) ensuring the equitable distribution of income and wealth in the country, (3) promotion healthy and progressive competition, (4) providing public goods and services, (5) correcting the spillovers of negative and positive externalities during market exchange and (6) providing a social and legal framework to facilitate all its functions.

Government-sponsored good- A good that is considered socially desirable by the political process and its production and use are encouraged through subsidies is a government-sponsored well. It is also known as a merit good. Example- Immunization Program

Government-inhibited good- A good which is considered socially undesirable by the political process and its production and use are discouraged through taxes and levies are a government inhibited good. Example- Tobacco