Question

Public Goods and Service -- Schools, Highways and Streets, Fire and Police Protection, National Defense, Prisons.   in which the price system does not produce an equitable price and quantity of output. Write a paper of 250 words minimum discussion with at least (2) sources cited in the MLA format. Include in your discussion: (1) What action has our government taken in order to provide this good or service in an equitable fashion?
(2) What are the alternatives to government intervention?
(3) What has been the end result of government intervention?

Answer 1

Equitable price is the ability to pay. However market segmentation plays an important condition. Government may intervene the market by taxation, price control and subsidy.

The rise in the taxes can effect the price and quantity of the commodity. Changes in the taxation and benifit system can reduce the chances of poverty. If proper system is implemented, it can improve incentives and lead to increase in supply of labor, helping to reduce the Equilibrium rate of unemployment.

Lower rate of taxes in corporate sector can also lead to increase in trade in form of increase investment on fixed capital. It can help to increase the GDP of the nation and lead the economy to high peaks. The Government can encourage entrepreneur by stimulating taxation and using it at right place. A favorable tax can also lead to increase on the flow of Foreign investment. The direct tax directly effect the working. It reduces the income earned by an individual. It effect the reduction in post-tax income for working individuals because for each hour of work done against the income is low. This may lead the one to work more to earn more so that he can reach the target. The best thing is the Government has introduced a lower starting rate of income tax for lower income earners. However they have to pay certain amount. This may encourage to some extend to work for more hours. Now if we talk about effect of indirect tax on goods and services like increase in the rising value of negative goods like alcohol, tobacco, etc which will ultimately effect its demand. On the other hand, Government financial subsidy to producers effect the production function and factors of production and will effect its market price too. The indirect taxation can sometimes be justified in market failure which can be stabilized by providing facilities like free checkup frequently at hospitals, reduction in education fees for poor.A equitable distribution of income may also promote an economy.

For illustration we can take example of IRISH Economy or China and China . They both have achieved healthcare gains by stabilizing health care resources, equilizing health distribution etc.

In Irish economy substanial cuts had lead to increase in investment. Low rates of company taxation had lead to increase in economic growth. GDP increased from 7.8%to 9.2%. Increase in exports had also been seen in Irish. More women entered the workforce. The change in fiscal policy was also an important factor in addressing weakness.

Capital investment should reach the required places on the purchase of machines, technology , innovation, social infrastructure, transportation, skills factors for lower class specially labours etc.