Question

Question 1 Think about the goods and services provided by your local government.

a) The classification in Figure 1 in Chapter 11 of the prescribed textbook by Mankiw, explain which category each of the following goods falls into:

i. Police protection

ii. Education

iii, Rural roads

iv City streets

b) Why do you think the government provides items that are not (pure) public goods?

Question 2 “People often throw out plastic bags and cigarette butts along the roads or highways, but rarely in their own backyard”.

a) Is this statement true in your country? If so, when was the last time you noticed someone litter in public-access areas (e.g. roads, parks, sidewalks, drains, river, etc.)?

b) Provide an economic explanation for this type of behaviour.

Answer 1

Solution of Question 1:

a.

i)Police protection - Public Good

Police protection falls under the category of Public goods. Public goods are those goods which are non- rival and non-excludable in nature and therefore is consumed by all. One person's consumption of such good does not effect the consumption of others. This is why public protection is provided to everyone.
ii) Snow plowing - Private Good
Snow plowing falls under the category of club good. Private goods are those goods which are both excludable and rival in consumption. It means that the one who pays for the service, only gets the facility. Since for snow plowing, the consumer has to pay a cost for availing the service, it falls under the category of private good.

iii) Education - Public Good
Education falls under the category of Public goods. Public goods are those goods which are non- rival and non-excludable in nature and therefore is consumed by all. One person's consumption of such good does not effect the consumption of others. This is why education is provided to everyone.

iv) Rural roads - Public Good
Rural roads falls under the category of Public goods. Public goods are those goods which are non- rival and non-excludable in nature and therefore is consumed by all. One person's consumption of such good does not effect the consumption of others. This is why rural roads is availed by all.

v) City Street- Public Good
City Street  falls under the category of Public goods. Public goods are those goods which are non- rival and non-excludable in nature and therefore is consumed by all. One person's consumption of such good does not effect the consumption of others. This is why city street is availed to everyone.

b.When government provides a good or services, they charge a lower price as compared to private firms.
Therefore, if the private sector willingly takes up the production of  a project , they will charge a higher fees to the public in order to avail that good or service. For example: the private schools charge higher fees than the public school. Due to this reason public schools are free or minimal at cost so that they can be availed by all. This is why the  government comes forward  and produces the good and provides it to the public at cheaper rates so that it benefit one and all.

Solution of Question 2:

a) “People often throw out plastic bags and cigarette butts along the roads or highways, but rarely in their own backyard”. This statement is true in my country as well.

It is regularly seen that the people throw coke cans on the sidewalks instead of in trash carts.

b) Throwing litter adds to the increasing pollution. Pollution is an externality and is referred as a bad commodity since it effects all. People litter in the sidewalks, rivers, roads , parks and all other public owned places because they know it will cleaned by the government executives. Instead, littering in the backyard will add extra cost plus extra labour in order to clean the backyard. People tend to behave in such manner due to their lazing ness and less caring nature towards others well being. So people litter in public places instead of their own backyard.