Pubplic choice and public good

East Africa University Buhodle Campus

Group “C”

Title: Public choice and Public goods

Semester Three

Faculty Of Business Administration

Lecturer: Mohamed Ibrahim Ismail japan

Subject: Micro-economics

Saturday, April 15, 2023

Group Names

Sakaria Abdiaziz Ismail

Mustafe Abdiftah Mohamed

Muse Ahmed Ali Khadra Suleiman Ali


After completing this presentation you will be able to take concept about

Choice and its typesPublic good &private goodWhy government existPublic Choice and the Political MarketplacePolitical EquilibriumA Fourfold Classification


Choices can be divided:-- Public choice -Private choice

Public choice defined:- a decision that has consequencesFor many people and perhaps for an entire society.

Choices


A private choice

A private choice:- is a decision that has

consequences forOnly the person making it.


Why Governments Exist

The economic theory of governmentExplains both why governments exist andWhy they do a less-than-perfect job.

Governments exist for three major reasons. 1. First, they establish and maintain property rights. 2. Second, they provide nonmarket mechanisms for allocating scarce resources. 3. Third, they implement arrangements thatredistribute income and wealth.


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The market economy also delivers and distribute income and trade that most people regard as

unfair.

Government failure:- is a situation in whichgovernment actions lead to inefficiency—toUnder provision.


Government failure

Government failure can arise because government

is made up of many individuals, each with theirown economic objectives. Public choices are theoutcome of the choices made by these

individuals.To analyze these choices, economists have

developeda public choice theory of the political

marketplace.Saturday, April 15, 2023

Public Choice and the Political Marketplace

Four groups of decision makersinteract in the political marketplace. They are

■ Voters ■ Firms ■ Politicians ■ Bureaucrats


Public Choice and the Political Marketplace

Voters: Voters evaluate politicians’ policy proposals,

benefit from public goods and services, and paysome of the taxes. Firms: Firms also evaluate politicians’ policy

proposals, Benefit from public goods and services, and pay some of the taxes.


Welcome muse


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Politicians: Politicians are the elected persons in the

federal, state, and local governments—for example the president of Somalia.

Voters express their demand for policies withtheir votes.Bureaucrats: are the public servants whowork in government departments.


Political Equilibrium

Voters, firms, politicians, and bureaucrats make theireconomic choices to achieve their own self-interest. Public GoodTo see what makes a good a public good, we distinguishtwo features of all goods: the extent to which people can be excluded from

consuming something. the extent to which one person’s consumption rivals the

consumption of others.


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Rival: A good is rival if one person’s use of it decreases the quantity available for someone else.


Welcome Mustapha


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A private good is one for which consumption is rival andFrom which consumers can be excluded. A public good isOne for which consumption is non rival and from which it Is impossible to exclude a consumer.

A common resource is one that is rival but non excludable. A good that is non rival But excludable is produced by a

natural monopoly


A Fourfold Classification

Private Goods A private good is both rival andExcludable. Public Goods : is both nontrivial andNon excludable. A public good simultaneously benefitseveryone, and no one can be excluded from itsbenefits. National defense is the best example of apublic good. Common Resources is rival and non excludable. A unit

of a common resource can beused only once, but no one can be prevented from

using what is available.


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Natural Monopoly Goods is non rival and excludable. When buyers can be

excluded if they don’t pay but the good is non rival,marginal cost is zero. Mixed Goods with External Benefits Two of theThings that have the greatest impact on your welfare,Your education and health care, are mixed goods withExternal benefits.


Inefficiencies that Require Public Choices

Public choices must be made to ■ Provide public goods and mixed goods

■ Conserve common resources ■ Regulate natural monopoly

Objective of Bureaucrats:- Bureaucrats want to maximizeTheir department’s budget because a biggerBudget brings greater status and more power. So theEmergency Services Department’s objective is toMaximize the budget for firefighting airplanes.


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A marginal external benefit is the benefit from anAdditional unit of a good or service that peoples otherThan its consumer enjoy. Marginal social benefit (MSB) is the marginal benefitEnjoyed by society—by the consumer of a good orService (marginal private benefit) and by others (theMarginal external benefit).


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Four devices that governments can use to achieve a

More efficient allocation of resources in the presence

Of external benefits are. ■ Public production ■ Private subsidies ■ Vouchers


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Health-Care ServicesHealth care is example of a mixed good withExternal benefits. The external benefits from healthCare include avoiding infectious diseases, living andWorking with healthy neighbors, and for many

people,Just living in a society in which poor, sick peopleHave access to affordable health care.


The EndAny Question Comment


Education

Pubplic choice and public good