Question

DB Role of Government

• How do private and public good differ?
  • Give 2 examples of each with explanation.
    
• How do regressive and progressive taxes differ?
  • Give 2 examples of each.
    
• What are some of the reasons for market failures?
  • Give some examples of markets fail?

Your initial post must be at least 100 words

Answer 1

Private and public good differ in their characteristics. Public goods are non-rivalry and non-excludable in nature whereas private goods are rival land excludable in nature. Public goods are non-rivalry because of the consumption of public good by a person does not decrease the availability of the good for consumption by another person. Example of such public goods can be national defense and street light. When someone is enjoying the national security it does not negotiate with the available security provisions for other citizens. Similarly, when someone is availing the street light, he is not reducing the light for someone else or making anyone deprived of the same

On the contrary private goods are rival in nature. When a unit of a private good is consumed by someone there is a reduction in the quantity available for consumption and another one excluded from the same. Example of private goods can be a berth in a train and a piece of ice cream. when someone reserves a berth he necessarily reduces the no. of available berths and excludes someone from availing the same berth. Same is the case for ice cream

Regressive taxes are taxes applies uniformly on everyone irrespective of income level. Although it seems fair but it is larger income share of lower income groups and smaller income share of the lower income groups. Tax on cigarettes and tolls for accessing roads are examples of regressive taxes.

Progressive taxes are taxes applies in increasing order on the basis of income group. Property taxes and wealth taxes are examples for this. It imposes a higher burden on the higher income group and a lower burden on the lower income group.

The two basic reasons for market failure are the positive and negative externalities. Say for example the well-kept flower garden bay a neighbor is improving my mood every evening but my neighbor cannot impose a fee on me for looking at his garden. It is a case of positive externality. Suppose there is howling in my neighbor and I am unable to sleep at night because of this. Still, I cannot charge him for monetary compensation for this negative externality.