Question

If the private sector provides education, too little education will be produced. Why? Explain all the market failures that can arise with privately provided education.

Answer 1

Education is the Merit Goods. Now we need to see what is Merit goods and why Merit good need to be provided by both the private sector and public sector.

First the Merit goods are the goods which is good for us. And if they are solely provided by private sector then the Merit goods would be less produced or provided. it means if education is provided only by private sector it will be less provided and too little education would be produced.

If education is only provided by private sector through the medium of private school only few families would be able to afford it. Leaving many families children uneducated which in tune would increase crime and reduce productivity due to less educated labour force.

So the government means public sector interfere to provide education at a very affordable cost to poor families children so that everyone in the society can become educated which in tune will increase the over all productivity of economy and country. Hence it will benefit the whole economy of the country.

So education must be provided both by public and private sector.