What would happen if the Government What would happen if the Government left road-building up to citizens or left road-building up to citizens or

private companies? What problems private companies? What problems might arise? (list 3)might arise? (list 3)

Warm-up

Providing Public GoodsProviding Public GoodsCh 3.3Ch 3.3

Public GoodPublic Good A public good is a ______ A public good is a ______

good or service for which it good or service for which it would be __________ or would be __________ or impractical to make impractical to make consumers pay individually consumers pay individually and to _______ nonpayers.and to _______ nonpayers. Would you pay a bill for the Would you pay a bill for the

launch of the space shuttle? launch of the space shuttle? Or the cleaning of Mount Or the cleaning of Mount Rushmore?Rushmore?

sharedshared

inefficientinefficient

excludeexclude

Public GoodsPublic Goods

The government collects ______ in The government collects ______ in order to fund projects in the public order to fund projects in the public interest.interest.

taxestaxes

National ParksNational Parks

If a park were _______ owned, the owner If a park were _______ owned, the owner could charge admission. Yet some could charge admission. Yet some benefits would still be enjoyed by benefits would still be enjoyed by nonpayers. Any number of consumers nonpayers. Any number of consumers can use public goods without _______ the can use public goods without _______ the benefits to any single consumer. And benefits to any single consumer. And increasing the number of _________ does increasing the number of _________ does not increase the cost.not increase the cost.

privatelyprivately

reducingreducing

consumersconsumers

Costs and BenefitsCosts and Benefits

When a good or service is ______When a good or service is ______1. The benefit to each individual is ____ than 1. The benefit to each individual is ____ than

the cost that each would have to pay if it were the cost that each would have to pay if it were provided ________provided ________

2. the total _______ to society are _______ 2. the total _______ to society are _______ than the total costthan the total cost

When the ______ does not provide the good, When the ______ does not provide the good, the ____________ must.the ____________ must.

publicpublic

lessless

privatelyprivately

benefitsbenefits greatergreater

marketmarketgovernmentgovernment

Public goods are financed by the public Public goods are financed by the public sector, the part of the economy involving sector, the part of the economy involving the government. the government.

The ______ sector is the part of the The ______ sector is the part of the economy that involves __________ of economy that involves __________ of individuals and businesses has individuals and businesses has __________ to produce public goods.__________ to produce public goods.

privateprivatetransactionstransactions

no incentiveno incentive

Free-Rider ProblemFree-Rider Problem Free rider is someone who would ____ choose Free rider is someone who would ____ choose

to pay for a certain good or service, but would to pay for a certain good or service, but would get the ________ of it anyway if it were get the ________ of it anyway if it were provided as a public good.provided as a public good. Army helmets, fire protection, roads… Would Army helmets, fire protection, roads… Would

you pay?you pay?

Free riders ________ what they do not Free riders ________ what they do not pay for. This problem suggests that if pay for. This problem suggests that if the government stopped collecting the government stopped collecting _____ and relied on _________ _____ and relied on _________ contributions, many public services contributions, many public services would have to be __________.would have to be __________.

notnot

benefitsbenefits

consumeconsume

taxestaxes voluntaryvoluntary

eliminatedeliminated

IS airport security a public good?IS airport security a public good?Before September 11Before September 11thth _______ were responsible _______ were responsible

for airport security – in Europe the government is for airport security – in Europe the government is responsible…now airplanes are seen as________, responsible…now airplanes are seen as________, thus the benefits go beyond the airline and the thus the benefits go beyond the airline and the ___________ is involved___________ is involved

airlinesairlines

weaponsweapons

governmentgovernment

Market FailureMarket Failure A situation in which the market does not A situation in which the market does not

___________________________.___________________________. When externalities are present, we have a When externalities are present, we have a

____________, because the costs or benefits of ____________, because the costs or benefits of a good or service are not assigned properly.a good or service are not assigned properly.

distribute resources efficientlydistribute resources efficiently

market failuremarket failure

ExternalityExternalityThe __________ side effect of a good or The __________ side effect of a good or

service that generates _____________ to service that generates _____________ to someone other than the person deciding someone other than the person deciding how much to produce or consumehow much to produce or consume

__________ may be positive or negative.__________ may be positive or negative.

economiceconomic

benefits or costsbenefits or costs

ExternalitiesExternalities

Positive ExternalitiesPositive Externalities Benefit of a good gained by someone Benefit of a good gained by someone

who ______ purchase itwho ______ purchase it Ex. Buy a old beat up house & remodel Ex. Buy a old beat up house & remodel

and beautify the outsideand beautify the outside Hire underprivileged teens and train themHire underprivileged teens and train them Protection of endangered speciesProtection of endangered species Give me 2 more examplesGive me 2 more examples

did notdid not

Negative ExternalitiesNegative Externalities Cost of producing a good or service is Cost of producing a good or service is

paid for by someone _____ than the paid for by someone _____ than the producer adding ___________ costsproducer adding ___________ costs Ex. Exxon Valdez leaks millions of gallons Ex. Exxon Valdez leaks millions of gallons

of oil in the oceanof oil in the ocean Your neighbor plays the accordion and Your neighbor plays the accordion and

holds Friday Polka parties…you hate polkaholds Friday Polka parties…you hate polka

otherotherunintendedunintended

Government GoalsGovernment Goals

Govt tries to _____ negative Govt tries to _____ negative externalitiesexternalitiesAntipollution devices in cars called Antipollution devices in cars called

catalytic converters & EPA to catalytic converters & EPA to decrease acid raindecrease acid rain

Govt encourages _______ Govt encourages _______ externalitiesexternalitiesEDUCATIONEDUCATION

limitlimit

positivepositive

Ch 3.4Ch 3.4Providing a Safety NetProviding a Safety Net

Poverty Poverty

Poverty threshold is when income level is Poverty threshold is when income level is ______ that which is needed to support ______ that which is needed to support families or householdsfamilies or households

The free market system generates wealth The free market system generates wealth but the wealth is spread _______ but the wealth is spread _______ throughout society.throughout society.

belowbelow

unevenlyunevenly

The Census Bureau's poverty The Census Bureau's poverty thresholds for 2006thresholds for 2006

One person (unrelated One person (unrelated individual)$10,294  individual)$10,294  

Under 65 years$10,488 Under 65 years$10,488    65 years and over$9,66965 years and over$9,669 Two people$13,167  Two people$13,167   Householder under 65 Householder under 65

years$13,569  years$13,569   Householder 65 years Householder 65 years

and over$12,201and over$12,201 Three people$16,079Three people$16,079

Four people$20,614Four people$20,614 Five people$24,382Five people$24,382 Six people$27,560Six people$27,560 Seven people$31,205Seven people$31,205 Eight people$34,774Eight people$34,774 Nine people or Nine people or

more$41,499more$41,499

Govt Role & QuestionsGovt Role & Questions

What can the govt do to combat poverty?What can the govt do to combat poverty?What should I do?What should I do? Is govt regulation the best way to help the Is govt regulation the best way to help the

poor?poor?Does welfare raise poor people’s standard Does welfare raise poor people’s standard

of living?of living?

Welfare SystemWelfare System

The government eases poverty by The government eases poverty by collecting ____ from individuals and collecting ____ from individuals and __________ some of those funds in the __________ some of those funds in the form of welfare.form of welfare.

Welfare is a general term that refers to Welfare is a general term that refers to government ___ for the poor. government ___ for the poor.

The nation’s welfare system began under The nation’s welfare system began under President ___ after the great depression.President ___ after the great depression.

taxestaxes

redistributingredistributing

aidaid

FDRFDR

Redistribution ProgramsRedistribution Programs

Cash _______ are direct payment of Cash _______ are direct payment of money to the money to the __________________________.__________________________.

Temporary Assistance for Needy FamiliesTemporary Assistance for Needy FamiliesSocial SecuritySocial SecurityUnemployment insuranceUnemployment insuranceWorkers CompWorkers Comp

TransfersTransfers

poor disabled and retired peoplepoor disabled and retired people

In-Kind BenefitsIn-Kind Benefits

Goods and services provided for ____ or Goods and services provided for ____ or at greatly reduced pricesat greatly reduced pricesFood StampsFood StampsSubsidized housingSubsidized housingLegal aidLegal aid

freefree

Medical BenefitsMedical Benefits The U.S. provides health The U.S. provides health

insurance for the _______ and insurance for the _______ and the disabled and the poor.the disabled and the poor.

Medicare covers Americans Medicare covers Americans over the age of ___ and the over the age of ___ and the disabled.disabled.

Medicaid covers poor people Medicaid covers poor people who are __________ or not who are __________ or not covered by their employers covered by their employers insurance plans.insurance plans.

elderlyelderly

6565

unemployedunemployed

EducationEducation

Education add to the Education add to the nation’s ____________ nation’s ____________ and labor productivity. and labor productivity.

human capitalhuman capital

Faith-Based InitiativesFaith-Based Initiatives

George W. Bush announced an initiative George W. Bush announced an initiative to rely on ______________ support for to rely on ______________ support for people in needpeople in needHe believes that religious organizations are He believes that religious organizations are

among the ______________ groups among the ______________ groups delivering social services. delivering social services.

Thus, these organizations will be allowed to Thus, these organizations will be allowed to _______ for ____________._______ for ____________.

non-governmentalnon-governmental

most successfulmost successful

competecompete federal fundsfederal funds

What do you think is America’s most What do you think is America’s most important feature of the country’s important feature of the country’s infrastructure?infrastructure?

Teens CASHTeens CASH

Merchants who once saw trouble in teens Merchants who once saw trouble in teens congregating in front of their stores now congregating in front of their stores now see _________, as teens have emerged see _________, as teens have emerged as an _______ force behind everything as an _______ force behind everything from fashion to entertainment to hair care. from fashion to entertainment to hair care. Today's teens are so different. Kids start Today's teens are so different. Kids start making buying decisions ______ than making buying decisions ______ than other generations. By the time they are other generations. By the time they are teens they are incredibly teens they are incredibly _____________________. _____________________.

dollar signsdollar signseconomiceconomic

earlierearlier

sophisticated consumerssophisticated consumers

ActivityActivity

Draft a proposal for a public good that Draft a proposal for a public good that would benefit the students of CHHSwould benefit the students of CHHS

Write a convincing proposal that includes:Write a convincing proposal that includes: Detailed description of the projectDetailed description of the project A list of the benefitsA list of the benefits An analysis of the costAn analysis of the cost An explanation of why benefits exceed costsAn explanation of why benefits exceed costs