Question

Assess discrepancies between public budgets and public needs. Explain the relationship between the public budget and the demand for public goods.

Answer 1

Public budget is similar to any other budget, which is an approximation of the costs and expense for coming year. In any budget, there are discrepancies given that a budget is not an definite expense report. In public budget, discrepancies might take place owing to unforeseen situations like if there is a natural disaster, state of emergency or rapid rise of a killer disease etc. These unpredicted situations can cause discrepancies among the public budget and the public needs. For instance, in recent times we had 3years of drought in a row in California, the state had no knowledge that a drought is going happening and did not have improved functioning budgets for the situation, thus there was discrepancy.

In case of pure public good, they are characterized by the well-known characteristics of non-exclusion and non-rivalry in consumption. Public goods are non-excludable as well as non-rival. Individuals cannot be in fact excluded from using them, and use by one does not diminish the good’s availability to others.

The collective demand for a public good is derived in a different way from the aggregate demand for private goods.

For an individual customer, the overall advantage of a public good is the dollar worth that he or she places on a given level of provision of the good. The marginal advantage for an individual is the raise in the total benefit which results from a one-unit raise in the quantity being provided. The marginal advantage of public good decreases as the level of the good provided increases. The government then makes use of cost-benefit investigation in order to decide whether to make available a particular public good and how much of it is to be provided. Cost-benefit analysis, sometimes called benefit-cost analysis, which is a systematic method for calculating the benefits as costs of a project to society as a whole. And finally public budgeting is done accordingly.