MARKET FAILURE AND GOVERNMENT INTERVENTIONS Allocative Efficiency and Market Failure

State Intervention MARKET FAILURE AND GOVERNMENT INTERVENTIONS

PRIVATE AND PUBLIC GOODS

Hospital High School Police Army Roads Bridges Medical Drugs University Dentist Visits Navy Air Force Cycle Helmets Cigarettes McDonalds Net Ball Courts Gambling Eye Examinations Seatbelts Cars with ASB breaks Snowboard Milk Recycling Plant Slippers Electric Blankets Alcohol Guns Cycle Ways Sports Stadiums Rubbish Collection Swimming Pools Park Street Lamp

Hospital High School Police Army Roads Bridges Medical Drugs University Dentist Visits Navy Air Force Cycle Helmets Cigarettes McDonalds Net Ball Courts Gambling Eye Examinations Seatbelts Cars with ASB breaks Snowboard Milk Recycling Plant Slippers Electric Blankets Alcohol Guns Cycle Ways Sports Stadiums Rubbish Collection Swimming Pools Park Street Lamp

PRODUCTION POSSIBILITIES CURVE Private goods Collective goods A B

CHARGING FOR A PUBLIC GOOD MB Charge Price Welfare lost through charging for public good. Capacity of the public good Quantity

TAX S D Quantity (000) Price ($) 0 10 20 30 40 50 70 80 60 10 20 30 40 50 S’

SUBSIDY S D Price ($) 0 10 20 30 40 50 70 80 60 10 20 30 40 50 Quantity (000) S’