In this presentation, I've underlined some of the important heading and the key points of the Public economics that the students must read for the better result.
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Public economics
1. PUBLIC ECONOMICS
The essential question of public economics and the main stress of our course is the question of whether the government
The essential question of public economics and the main stress of our
course is the question of whether the government should intervene in
the market and if so, how? To have an answer to this question, we need
some benchmark measures against which we can critically compare the
outcome with and without the government interference.
The appropriate role of government provides a preliminary point for the
analysis of public finance. In theory, under some circumstances, private
markets will assign goods and services among individuals resourcefully (in the
sense that no wastage occurs and that the individual tastes are correctly
matching with the economy’s productive abilities).
If the private markets were able to provide effective outcomes and if such
distribution of the income were socially acceptable, then there would have
been little or no scope for government at all.
2. The essential question of public economics and the main stress
of our course is the question of whether the government should
intervene in the market and if so, how?
To have an answer to this question, we need some benchmark
measures against which we can critically compare the outcome
with and without the government interference.
3. The appropriate role of government provides a preliminary point for the analysis of
public finance. In theory, under some circumstances, private markets will assign
goods and services among individuals resourcefully (in the sense that no wastage
occurs and that the individual tastes are correctly matching with the economy’s
productive abilities).
If the private markets were able to provide effective outcomes and if such
distribution of the income were socially acceptable, then there would have been
little or no scope for government at all.
4. In several cases,
however, conditions
for
the
private
market efficiency are
often violated.
For
example,
if
several people can
enjoy the same good
at the same time,
then the private
markets may tend to
supply too little of
that good. National
defence is one of the
examples of nonrival consumption, or
moreover of a public
good.
5. Externalities, informational advantages, public
goods, strong economies of scale, as well as
network effects can often cause market
failures. Public provisions through a
government or a voluntary association are
subject to other kinds of inefficiencies, which
are termed as “government failures.”
“Market failure” generally occurs
when the private markets do not
efficiently allocate goods or services.
The existence of such market failure
provides a rationale based on
efficiency for collective or for
governmental provisions of goods and
services.
6. Under
large
assumptions,
government decisions about the
effective scope and level of
activities can be proficiently
alienated from decisions about the
design of taxation systems (termed
as Diamond-Melees separation).
In this outlook, public sector programs should be designed in such a way
that it can maximize social benefits minus costs
(known as cost-benefit analysis)
and then revenues needed to pay for those spending should be raised
through a proper taxation system which creates the fewest efficiency
losses normally caused by a distortion of economic activity
7. Government can then pay for spending by borrowing
(for example, by distributing government bonds),
although borrowing is a way of distributing tax
burdens through time rather than a simple
replacement for taxes.
A deficit is termed as the difference between the
total government spending and its revenues. The
accumulation of deficits over time is called the total
public debt.
Deficit finance allows governments to smoothen out
tax burdens over time, and generally it gives
governments a decisive fiscal policy tool. Deficits
can also narrow down the options of successor
governments as such.
8. Historical government spending in the United States from 1902 to
2010 (2008 estimate, percent GDP. 2009, 2010 ‘guesstimated’ estimate)
Public finance is very much connected to the issues of income distribution as
well as social equity. Governments can reallocate their income through the
transfer payments or by designing effective tax systems which treat
s high-income and low-income households in a different way.
The Public Choice approach to the public finance attempts to explain how
the self-interested voters, politicians, as well as the bureaucrats actually
operate, rather than how should they operate.
9. Public finance is very much connected to the
issues of income distribution as well as social
equity. Governments can reallocate their income
through the transfer payments or by designing
effective tax systems which treats high-income
and low-income households in a different way.
The Public Choice approach to the public finance
attempts to explain how the self-interested
voters, politicians, as well as the bureaucrats
actually operate, rather than how should they
operate.
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