Question

write short note on the following:
1. State vs Markets
2. Input-Output Analysis
3. Public vs Private Sector

Answer 1

1) The state is an organisation for monopolizing legitimate coerocive power. It makes two types of choices public and social choices. Public choices includes choices about various economic activties. It intervenes in the market when it is concerning a larger number of people. Market, on the other hand, is an organisation that coordinates the production and consumption of goods and services through voluntary transactions. It coordinates people's activities in seeking self interest towrads increasing social economic welfare. The emergence of market failure has made it important for complimentary government agencies to intervene in the market.

2) The input - output analysis is invented by professor Wassily Leontiff in 1951. It is used to understand the interdependencies and compexities of the economy and conditions for maintaining equilibrium between supply and demand. In equilibrium the money value of aggregate output equals the sum of money value of inter industry input and inter industry output. It assumes the following:

• There are two sectors -inter industry sector and dinal demand sector
• Each industry produces only one homogenous product
• Prices, consumer demand and factor supplies are given
• there is constant returns to scales
• No external economies or diseconomies of production
• Inputs are combined in fixed proportion

3) The private sector comprises of business which is owned, managed and controlled by individuals. While the public sector comprises of various business enterprises owned and managed by Government. Such organizations are either fully or partly owned by the center or state and come under the separate ministry. The public sector aims at social welfare maximisation while the private sector aims at profit maximisation.