Examine four reasons why certain goods and services are usually supplied directly by the government rather...

Examine four reasons why certain goods and services are usually supplied directly by the government rather than through the market

Expert Solution

Government provides certain goods or services such as national defense. Following are the reasons why such goods are directly supplied by the government rather than through market.

1) To increase Welfare.

Private sector is motivated by profit. Thus leaving the supply of goods like education and defense to private sector may have some adverse effects on the society. Government on the other hand aims to increase Welfare. So government should be entrusted with the responsibility of providing such goods.

2) To improve the distribution of income and wealth.

There are many circumstances where the private market fails to achieve an efficient outcome resulting in unjust justification of income and wealth.In these situations, society may be better off when actions are conducted by the government.

3) Lack of private sector participation.

There are certain fields from where private sector enterprises would like to remain absent ( social security, environment protection) . The government intervention will be necessary in such a situation.

4) Market failure.

If all the goods and services are produced and supplied by the private sector,lt may lead to market failure. When market failure happens, there may be undersupply of goods. Then ,again government becomes the last resort.

Rahul Sunny answered 8 months ago

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