Economics for Business Assignment Sample
ASSESSMENT TOPIC: Private vs. public goods in the UK and social welfare
This assessment focused on the difference between private goods, which can be efficiently provided by markets, and public goods and quasi-public goods which markets fail to supply in an equitable way to the public. Merit and demerit goods will also be considered in order to analyse their positive or negative impacts on society, and why government intervention may be required to control access to these goods.
Task 1: (900+ words)
1. Using economics theories from Krugman & Wells textbook (2020, 5th edition), and current UK examples from the past three years (2018-2021), explain why the UK economy requires public, quasi-public, and private goods, giving examples of when the UK market fails to provide access to necessary private goods, why and how the UK government must provide public goods and quasi- public.
2. Analyse examples of when the UK government has difficulty in providing sufficient access to public goods and quasi-public. Explain whether you think UK public spending and UK social welfare programmes do or do not result in fair access to public goods and quasi-public goods. Use relevant examples of UK public, quasi-public, and private goods, providing real-life examples and references from the UK market and UK news from 2018-2020 to support your explanations.
Task 2: (900+ words)
1. Using economics theories from Krugman & Wells textbook (2020, 5th edition), and current UK examples from the past three years (2018-2021), discuss merit and demerit goods in the UK market. Analyse real-life examples of merit and their positive impacts on society, and contrast this with analysis of demerit goods in the UK and their negative impact on society.
2. Analyse how the UK government used policies and funding to improve access to merit goods, and how it discourages and reduces access to demerit goods, providing real examples of UK government interventions and strategies.
3. Explain whether you believe that the UK government interventions does or did not effectively address the fair provision of merit goods. Include relevant examples and references from the UK from the past three years (2018-2021), UK news, and UK government publications to support your explanations.
Assignment Instructions:
1. The coursework should begin with a cover page, including your student ID, the module name and code, date, coursework title, and your word count. Do not include your name anywhere on the document or in its title to allow for anonymous marking. All pages must be numbered and your student ID should appear at the top of each page (excluding the cover page).
2. Following the cover page, write a brief executive summary that addresses issues in the topic statement above (no more than 200 words). The executive summary counts within the word limit.
3. Provide both an introduction paragraph and a conclusion paragraph for the full coursework, both of which must also be aligned to your executive summary.
4. Base your coursework on the content from lectures 1-14 of ARUL Business Economics and the required reading from chapter 1-14 in the Krugman & Wells textbook (2020, 5th edition) textbook on Kortext. Using further relevant content from the Krugman & Wells textbook will add to the quality and of your coursework. The textbook is a required reference for this assessment, lack of use of course materials will result in a significant loss of marks.
5. After the final conclusion paragraph, you must finish your coursework with a Harvard style list of references or bibliography with the approved data sources in alphabetical order by author surname (only one reference listing per source, regardless of number of times used in the coursework). Students should use at least five different approved data sources listed below and this must include the Krugman & Wells (2020, 5th edition) EFB MOD3327 textbook.
6. Plain formatting is preferred throughout. Avoid unnecessary coloured text, or decorative images that are not directly providing data (avoid decorative cover pages as they are not academically necessary or useful). A simple table of contents after the cover page is acceptable but not required. You must check spelling, formatting, graph labels, in-text citations, referencing, and grammar before submission to avoid loss of marks (up to 10% loss for formatting errors).
Solution
Introduction
There are different types of goods and services that can be seen to be demanded by the general population of any country at any point of time and these products and services can also be seen to vary substantially in terms of their nature and demand and supply patterns. In the present period, although majority of the economies can be seen to operate in a free market environment, however, leaving the production and sales of all goods in the hands of free markets can lead to inefficient outcomes in many cases (GOV.UK, 2021). According to UNI Assignment Help, Keeping this into consideration, the concerned report tries to emphasize on the notions of public goods, quasi-public goods and private goods and also on the merit goods and demerit goods, thereby highlighting real examples of the same. The concerned report can also be seen to emphasize on the UK market and the need for involvement of the government of the UK in the production of different public and quasi-public goods as well as in controlling and managing access to the merit and demerit goods in the present period.
Task 1
Public, quasi-public and private goods in the UK market
The nature of different products and services developed and made available for the population in an economy can be seen to vary, based on their nature and also based on the aspects of rivalry and excludability and based on these attributes, the different types of goods required to be produced in an economy can be seen to be as follows:
Figure 1: Types of goods required and produced in an economy
(Source: Investopedia.com, 2021)
While rival goods can be possessed and consumed by one user, excludability in a product, for which people can be excluded from the usage of the same. In case of private goods, there are both rivalry and excludability and thus, the demand and supply of these products depend on the purchasing power and demand for these products and these are mostly determined by the market operations to a substantial extent (Investopedia.com 2021). However, there are many products which are required for ensuring overall welfare of all sections of the population of a nation. These products are non-rivalrous and non-excludable and examples are healthcare, defence and others. Quasi-public goods are non-rival but people can be excluded from the consumption of the same and examples of such commodities are roads, tunnels and bridges (Krugman and Wells 2020).
As per the theories in Krugman and Wells (2020), the externality theory can help in highlighting the differences in the social and private costs of production of these products, which can be seen to be as follows:
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Figure 2: Positive externalities in public goods
(Source: Investopedia.com 2021)
Thus, for these products there is a lack of private producers in the market and thus, the free-market production can be seen to be lower than socially efficient allocation of the same. Keeping into consideration, the announcement of Brexit, which implies the exist of Britain from the European Union, it is of immense importance for the concerned economy to be self-sufficient, at least in the domain of production of those commodities and services which are needed by the general population of the concerned country, as after the implementation of Brexit, the UK cannot be dependent heavily on the other nations of the EU as the country would not enjoy the facilities of the FTAs which it used to enjoy as a member of the EU (Gov.scot 2021).
On the other hand, there are various instances of market failure in the UK economy, which highlights the need for the UK government to provide public goods and quasi-public goods. For instance, the private healthcare expenditures in the UK can be seen to be increasing consistently over the years:
Figure 3: Rising private healthcare costs in the UK
(Source: Ons.gov.uk 2021)
This, highlights the need for intervention of the UK government, especially in the production of sufficient public healthcare services to meet the demand of all sections of the population of the concerned nation. On the other hand, for ensuring that everyone in the UK can avail the benefits of infrastructures like railways, roads, bridges and others, with the rising population in the concerned country, it is also important for the government of the UK needs to emphasize on the development and production of these types of quasi-public commodities in the concerned country (Ons.gov.uk 2021). For provision of these products, it is important for the UK government to use proper tax and subsidy systems for reduction of the production of products with negative externalities and for increasing the production of the public goods and the quasi-public goods required in the concerned commodity.
Examples of difficulties of the UK government in provision of public and quasi-public goods
Although there are different reasons behind the need for the government of the United Kingdom, to provide the different public and quasi-public goods, however, there are difficulties that can be seen to be faced by the UK government in providing sufficient access to the public goods and quasi-public goods and the primary limitation can be seen to be of that of the lack of budget for the concerned government to produce the different public goods and quasi-public goods and this can be shown with the help of the following figure:
Figure 4: Budget deficit faced by the UK government in 2017-2021
(Source: Ons.gov.uk 2021)
This lack of budget, along with the rise in the demand for different public goods and quasi-public goods can be seen to create challenges in the provision of sufficient access to the public goods and the quasi-public goods of the general population.
Figure 5: Overheating of the public health care expenditure in the UK over the years
(Source: Ons.gov.uk 2021)
As evident from the above figure, the UK public health system has already been overheated, in the present period, which in turn can be seen to highlight the presence of public inefficiencies in the concerned process. On the other hand, the aspects of public schooling and free schooling can also be seen to suffer in the UK, especially in the present period, due to the challenges that are being faced by the concerned country and its government due to the ongoing and unprecedented COVID-19 pandemic crisis (Ons.gov.uk 2021). On the other hand, it can also be seen that the public schools in the UK are less successful than the public schools in ensuring that the students get employment in local and international markets in the present period and this is shown as below:
Figure 6: Success of public schools and private schools
(Source: Yougov.co.uk 2021)
This implies that the UK government is not fully successful in terms of their social welfare programmes and their expenditures in the concerned domains. Thus, it is of immense importance for the UK government to ensure more efficient allocation of resources and also to enter into public-private partnerships to ensure presence of higher pool of resources and also to ensure presence of technologies and human capitals to facilitate the development of more effective public spending and development of more efficient social welfare programmes to facilitate the production of increased access to private, public as well as quasi-public goods in the concerned country (Yougov.co.uk 2021).
Task 2
Merit and demerit goods in the UK market: Analysis of their positive and negative impacts
The term merit goods, refer to those commodities and services that can be under-consumed or under-produced in an economy if the production of the same is left in the hands of the free-market economy (Krugman and Wells 2020). And this may be due to the difference between the private benefit and the social benefit of the same, and in case of the merit goods, the public benefit can be seen to be higher than the private benefit and this can be shown as below:
Figure 7: Loss of welfare due to under-consumption of merit goods
(Source: Tutor2u.net 2021)
The primary examples of merit goods can be seen to be healthcare, education, housing, fire protection and others. The demerit goods, on the other hand, can be seen to be those commodities, which if left in the hands of the free-market demand and supply interactions, will be over consumed and which can also be seen to have considerably negative impacts on the society: The problems of demerit goods in the society can be shown with the help of the following figure:
Figure 8: Problems of demerit goods in an economy
(Source: Tutor2u.net 2021)
Thus, the demerit goods need to be produced lower than the free market levels, since for such commodities, the marginal social cost is higher than the marginal private cost. The examples of such demerit goods are tobacco, alcohol and others.
The efficient production of merit commodities can be seen to increase the welfare of the population of the concerned country (Tutor2u.net 2021). In case of the UK, one of the merit goods of immense importance are the housings and this is because, the free-market housing prices in the concerned country can be seen to be increasing considerably with time which is evident from the following figure, showing the housing price index in the concerned country with time:
Figure 9: Rise in the housing prices of the UK over the years
(Source: GOV.UK 2021)
There are different affordable housing programs implemented by the government of the UK in the present period, which have been helping especially the middle-income class and the lower middle-income class of the societies to gain access to such housings. On the other hand, the negative impacts of tobacco consumption among the general population of the UK can also be seen to be evident, with increasing extent and burden of cardiac issues and other diseases among the population (both male and female) of the concerned country.
Effectiveness of the policies used by the UK government for merit goods and demerit goods
The UK government can be seen to be taking different policies and emphasising on funding of production of more merit goods like that of housing on one hand, and the concerned government can also be seen to use policies like that of taxing demerit goods like tobacco and alcohol in the concerned country. For example, to increase access to the affordable housing the UK government can be seen to have launched the Affordable Homes Programme 2021 to 2026, in the present period, and this programme especially facilitates the housing needs of those whose demands for affordable housing cannot be seen to be met by the free market operations in the concerned domain of the specific merit goods provision (GOV.UK 2021). The concerned programme can be seen to be considerable funding for the purpose of the development of affordable housing for sale in the UK and also for development of affordable accommodations that can be provided for rent to the general population of the concerned country, and the government especially encourages young and aspiring homeowners in terms of financial support to help them in getting their first house in an affordable price (Gov.uk 2021). Thus, the government of the UK can be seen to be emphasising on development and provision of higher access to the housing (which is visibly a merit good in the UK), to reduce the problems and the burden of homelessness in the concerned nation.
On the other hand, to decrease the access and thereby the consumption of the demerit goods like that of tobacco, the government of the concerned country can be seen to implement a taxation policy with considerably high rate of consumption tax for the general population who try to consume any kind of tobacco product and this can be seen with the help of the following table:
Table 1: Taxes imposed by the UK government on different tobacco products
(Source: GOV.UK 2021)
Thus, as evident from the above table, the government of the United Kingdom, in the present period, has imposed considerably high amount of taxes on different types of tobacco products and in addition to the same, the consumers are also required to pay a value-added tax (VAT) of 20% on not only tobacco products but also on alcohol. This has been done by the concerned government of the UK to tackle with the production and consumption of the concerned demerit goods and to reduce the level of consumption to a socially optimal level, which should be lesser than the level of over consumption of the same, which would have happened if the same would have been left by the government of the concerned nation in the hands of the free-market operations in the present period (GOV.UK 2021).
Level of Effectiveness of The UK Government Interventions in Provision of Merit Goods
As discussed in the above section of the concerned report, the government of the UK has been considerably successful in reducing the access of the general population of the concerned country to the demerit goods like that of different types of tobacco products, through its rigorous taxing policies for such products and this is evident from the fall in the overall extent of consumption of tobacco products among both the male and the female population in the concerned country with time, as can be seen to be evident from the following figure:
Figure 10: Fall in the consumption of tobacco among the general population of the UK over the years
(Source: GOV.UK 2021)
On the other hand, there have been considerable fluctuations in the domain of provision and supply of the affordable housing by the UK government in the last few years and this can be shown as below:
Figure 11: Fluctuations of the affordable housing supply in the UK over the last three years
(Source: Gov.scot 2021)
Much of the fluctuations can be seen to be attributed to the logistic as well as to the funding-related difficulties faced by the UK government in the present period due to the ongoing COVID-19 pandemic crisis situation in the concerned country.
Figure 12: Extents of availabilities of ownership and rents for affordable housing in the UK over the years
(Source: Gov.scot 2021)
From the above figure, it can be asserted that the government of the concerned country has been trying to ensure fair provision of the concerned merit goods of affordable housing to the general population of the concerned country, keeping into consideration, the rising burden of increasing price of the same due to the under-supply in the free-market situation, especially in the last few years (GOV.UK 2021). This in turn, can be seen to have helped in reducing the negative impacts of the concerned rise in the housing prices in the UK over the years, to some extent.
Conclusion
The above discussion and the findings of the concerned report make it evident that in the present period there are different public and quasi-public commodities that have to be produced and supplied with the support of the UK government and there are also needs for the government of the concerned country to emphasize on increasing the access of the general population to the merit goods and decreasing their access to the different types of demerit goods in the current situation. The performance of the UK government in the domain of provision of different types of public and quasi-public commodities and also in management and control of the access towards different types of demerit goods and merit goods have also been discussed in the concerned report.
References
Gov.scot, 2021. Housing statistics quarterly update: June 2021 - gov. scot. [online] Gov.scot. Available at: <https://www.gov.scot/publications/housing-statistics-scotland-quarterly-update-2/pages/8/> [Accessed 19 June 2021].
GOV.UK, 2021. Apply for affordable housing funding. [online] GOV.UK. Available at: <https://www.gov.uk/guidance/apply-for-affordable-housing-funding#about> [Accessed 19 June 2021].
Gov.uk, 2021. Housing: detailed information - GOV.UK. [online] Gov.uk. Available at: <https://www.gov.uk/topic/housing> [Accessed 19 June 2021].
GOV.UK, 2021. Tax on shopping and services. [online] GOV.UK. Available at: <https://www.gov.uk/tax-on-shopping/alcohol-tobacco> [Accessed 19 June 2021].
Investopedia.com, 2021. Private Good Definition. [online] Investopedia. Available at: <https://www.investopedia.com/terms/p/private-good.asp> [Accessed 19 June 2021].
Investopedia.com, 2021. Understanding Externalities. [online] Investopedia. Available at: <https://www.investopedia.com/terms/e/externality.asp> [Accessed 19 June 2021].
Tutor2u.net, 2021. Explaining Merit Goods | tutor2u. [online] tutor2u. Available at: <https://www.tutor2u.net/economics/reference/merit-goods> [Accessed 19 June 2021].
Yougov.co.uk, 2021. State school children believe privately educated pupils are more successful | YouGov. [online] Yougov.co.uk. Available at: <https://yougov.co.uk/topics/politics/articles-reports/2016/02/02/state-school-children-believe-privately-educated-p> [Accessed 19 June 2021].
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