5. What implications might the fact that efficient market is a public good have
for the efficiency with which governments function?
A public good is a good which can be enjoyed by all citizens without someone
being excluded from using it. For example, anyone can attend a public school
or visit a public park without another citizens being excluded from using the
park or attending the school. We know that public goods are non- excludable
and non-rival in nature.
An efficient government is a public good in the sense that the efficiency of a
government is enjoyed by all the citizens of the country. A government
functioning efficiently refers to better economic conditions, better standard or
living , protection of rights and environment , equitable distribution of income .
These factors are enjoyed by every citizen. One getting the benefits from an
efficient government does not reduce the benefits received by another.
Or
By definition, a public good is a commodity provided for all. It is non-excludible
and non-rival; therefore there won't be a need to pay for the benefit. This is
usually provided by the government or the private sector. An efficient market
on the other hand pertains to a market that incorporates all available
information into prices. Therefore, prices are expected to be correctly valued
(Chappelow, 2020). This could be a benefit for all as there is assurance that
consumers pay for the value they receive.
With this in mind, an efficient government plays a role in encouraging and
discouraging markets. It can implement rules and regulations in order to
increase market efficiency. It can implement regulations in ensuring
transparency among the private sector, and formulating standards for annual
reports. This gives confidence to the consumers that economic events are
disclosed by the entity. The government can also influence the pricing
behaviour of the market, by implementing price ceiling and price floors. It can
regulate the entry and exit of businesses in an industry. And the government
can improve infrastructure such as internet connection, and websites in order
to attain perfect knowledge on the market at zero or minimum cost.
6. Discuss the issue of vaccination from the perspective of public
goods/externalities. Why might individuals not voluntarily consent to be
vaccinated?
Externalities cause market failure if the price mechanism does not take
account of the social costs and benefits of production and consumption
A positive consumption externality occurs when consuming a good cause a
positive spill over to a third party lying outside the transaction.
Vaccinated is positive consumption externality.
We can see the graph
Social benefits of consumption exceed the private benefits
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The social marginal benefit curve (SMB) is drawn higher than private marginal
benefit (PMB)
In a free market (without government intervention) there will be underconsumption of goods with positive consumption externalities
This leads to market failure
Vaccinations produce positive externalities, since one individual’s receiving a
shot reduces his or her chances of getting sick as well as the chances of those
around him. But that individual does not take into account the benefits to
those around who are less likely to get sick. It is possible to free ride off of
others’ vaccinations; if everyone else is vaccinated except one person, the
chances that any one person will get sick are greatly reduced, even without
receiving a shot him- or herself. Considering the time costs and the potential
pain of the procedure, people may attempt to free ride and may not
voluntarily consent to being vaccinated.