Economics for Business: Public, Quasi-Public, and Private Goods in the UK Market

This report discusses the concept of public, quasi-public, and private goods in the UK market and explains why the UK economy requires them. It also covers the concept of merit and demerit goods and their impact on society. The report further explains how the UK government uses policies and funding to improve access to merit goods and limit access to demerit goods. The report concludes by discussing the effectiveness of UK government interventions in the fair provision of merit goods.

For business
1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Explain why the UK economy requires public, quasi-public, and private goods........................3
When the UK government has difficulty in providing sufficient access to public goods and
quasi-public..................................................................................................................................4
TASK 2............................................................................................................................................5
Discuss merit and demerit goods in UK market and example.....................................................5
How the UK government used policies and funding to improve access to merit goods.............6
UK government interventions does or did not effectively address the fair provision of merit
goods............................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
2

INTRODUCTION
Economics can be explained as that part of knowledge or learning which is concerned with
production and consumption of goods and service in a given society. It also includes the transfer
of wealth, allocation of resources and maximum utilization of scarce resources. There are 2
common goods in economy that is public and private. It is offered by all types of companies to
people.
This report will discuss the explanation of merit and demerit goods in a market with the help
of certain examples. The positive impact of consumption of merit goods on the society with
contrast to the negative effect caused by consumption of demerit goods on the society will also
be discussed.
TASK 1
Explain why the UK economy requires public, quasi-public, and private goods
Public goods
Public goods benefit people without having any payment concept. Here, benefit of good is not
dependent on another. Moreover, it is said that no consideration is there and dependency of
benefit from one person to another (FERNANDO, 2020). Besides, public good is not support by
market in effective way so people can use it in efficiently to fulfil their needs. Moreover, no one
is excluded from consuming of this type of goods.
Private goods
The goods in which the ownership is restricted. The goods are owner by individual and it
is also excluded by people. For instance- people who are having subscription of TV will only be
able to watch it otherwise those who are not having subscription will not be able to watch it.
So, in UK both public and private goods are required. The people can not be excluded
from consuming of public goods and there is no substitute of it. Therefore, it is necessary for gov
that they supply public goods in market. Alongside, due to cost analysis the cost as well as social
benefit is determined and then goods is supplied. However, in private goods they are excluded
and rival which is necessary for UK market to supply as lead in market. Other than this, it is
analyzed that goods that are not excludable than a problem of free rider occurs in market which
result is occurring of non payment to producer and this affect production (Free Rider Problem.,
2020). However, in minimum cost it is paid to producers that led to delay in consuming of goods.
3

Thus, in order to maintain balance between demand and supply in UK market, private goods are
useful. The goods also produce competition in market and help out economy to run.
Besides, it has been stated that UK gov failed to access private goods in case when the
marginal social benefit was 0. This shows the benefit which is produced from production and
consumption of goods is 0 in environment. So, if gov do not interfere in that than this led to
increase in pollution level. Furthermore, consuming of private goods will increase. Hence, when
in 1960- 70 pollution level raised than Clear air act was applied. This was done to impose
emission tax in pollution and gov made interfere in restricting of private goods. Also, one more
example that can be taken is UK gov formed pigouvian tax. It was imposed in regard with
marginal benefit and cost concept along with consuming of private goods.
Quasi-public goods:
It has features of public as well as private goods (Quasi-public goods, 2021). This means
that they possess partial rivalry, excludability, reject. Quasi goods is having feature of both these
goods.
Besides that, it is stated public goods is not having any competitor and they are consumed
for free. Here, main benefit is social and cost of production. Also, UK gov gives consumption
support for it. The producers are not involved in payment so this led to dissatisfaction among
them. On contrary there is no decrease in priority of public goods. For instance- the use sewage
system in UK do not include personal payment. But it benefits UK in hygiene.
Similarly, public goods social benefit is high so there is more production done. However,
private goods rule the market and satisfy needs of public but they can’t be compare with public
ones. Hence, these goods is offered more by gov. furthermore, the UK gov must emphasis on
cost benefit analysis so that decision can be taken for public goods. The goods relate in offering
health care services, national defence, etc. Thus, the benefit of these goods is more than private
ones. It is also reason for UK gov to support them.
When the UK government has difficulty in providing sufficient access to public goods and quasi-
public
When there arises issue of free ride in UK the access to public goods becomes difficult.
The people use public goods to satisfy their needs by accessing it. But its consumption is
affected when gov help producers. This is because it led to impose of prices and cost of
4

consuming goods decrease. The UK gov face affect access of public goods. But it also affect
producer who are in market when goods is given free of cost.
It is found that some social program that give fair access of public goods. It consists of
defence and disease prevention. The policy is used for marginal cost so UK gov has provided
access to public goods. For example – for prevention against covid 19 there is policy of free
access to health care which is formed by UK gov. Besides, gov also supported that health
services is accessed by people. This can also be understood with the sewage or police service,
transports, roads, dams and various other examples of public goods that are being enabled access
and support of the UK government policy and programmes. Likewise, setting up of policy with
respect to taxes, emission taxes, pollution standards it again makes support of the private goods
that may include the manufacturing of the clothes, cars, food and various other private goods.
Thus, it can be right to said that with efficient policies and programmes, UK government make
support of both the goods and enable societal along with economic benefit to country
TASK 2
Discuss merit and demerit goods in UK market and example
The discussion is as below :
Merit goods: The goods whose benefit apart from the personal utility, to others is not known to
the consumer at the time of consumption (Explaining merit goods, 2021). If that product goes
under-consumption, the government may feel the necessity to provide these goods free for use,
so that the consumption is not just dependent upon the payment by the consumers to buy these
goods. Since the goods are consumed for fulfilling private utility and self interests, it is very
unlikely to take those external benefits into consideration when the consumer at the point of
consumption or when evaluating its worth. Merit goods have two characteristics
 The benefit of consumption might not be fully recognized by the consumer at the time of
consumption; But consumption of a merit good also creates external benefits to the society, which are
also not recognized at the point of consumption of that good.
Examples and Positive impact on society:
1. Healthcare is considered as merit good. In UK the vaccine for COVID-19 is free of cost
to all the citizens. The vaccine of COVID-19 does not just protects a single individual but
it also protects the other people from catching the disease.
5

2. Education. Any student is motivated to study hard and get good grades to benefit his
future. He cannot be motivated to study hard because of the benefits it will provide to the
society. Although this will ultimately affect the society in a positive way at some point in
their lives. However, an individual cannot think of these benefits at the time of getting
education.
Demerit goods: The goods whose consumption creates a negative effect on the people and the
society are demerit goods. These goods are considered as 'bad' which means they can affect the
consumer negatively. It creates costs that goes beyond to others than to the person consuming
those goods (De merit goods, 2021). The private costs of consumption of demerit goods might
not be recognized easily but its costs to the society or other people are easily recognizable to the
consumer of those goods.
Examples and Negative impact on society:
 Alcohol . If a driver drinks excessively and crashes into another driver, then he is not just
risking his life but the life of other people is also in danger. This can cause serious traffic
jams and damage the public and private property too. This will give mental and physical
issues because of which he might not be able to give outputs at work, causing financial
costs to the employer. Also, the treatment expenses will also be paid by others. Society
suffers because of excessive consumption of these goods.
 Smoking at public place. Excessive smoking at a public place will reduce the benefits and
can cause serious health issues like breathing problems to public. The government bears
those health costs. This increases the tax payment by the government which will be
generated from the society. The cost of consumption to the society is known to the
consumer but, they refuse to consider these effects.
How the UK government used policies and funding to improve access to merit goods
It is found that there are certain policies which is form by UK gov to access merit goods.
This need to allocate funds for these goods as it is offered free by gov. There is need of more
funds to give public goods to people. In UK the gov implemented European model in merit
goods funding. Here, tax is collected from varied sources. Then, the resources is allocated for it
on basis of needs of consuming of merit goods by people in market. besides that, there are some
policy by which goods are funded (Paolo, 2018). The first is tackling of health issue which are at
national level. Also, the public policy is there to access merit goods. Through that, it become
6

easy for gov to solve issues such as social, economic, etc. which are public issues. therefore, it is
easy for people to access and consume these goods.
On other hand, when tax is used to fund merit goods thus this led to limit access of
demerit goods. It is because gov increase tax on items such as alcohol, junk food, etc. that does
not benefit society. therefore, prices of demerit goods increases. This puts limits to its access as
well. In addition, gov do not allocate funds to demerit goods. They make people aware about its
affect. With that the UK gov do intervention and decrease access of demerit goods.
Additionally, some other intervention is also taken by UK gov in both these goods. In
regard with merit goods UK gov act as supplier and then delivery of goods is done. In that they
offer goods to people directly and quickly. With that it led to improve access of merit goods. The
gov buys goods from private players as well by acting as buyer. This also result to offer goods to
people. But in demerit goods gov interfere by imposing tax and fines. They charge high fines for
it thus this led to reduction in access of goods. In that statutory requirement is also imposed. For
instance- defining of specific age for people to consume alcohol and smoke. It prevents minor to
consume it. The tax imposed is done to reduce goods consumption. Apart from it, legislation that
is Prohibition law of UK 1930 is imposed which help in limiting consuming of demerit goods.
Therefore, these are some interventions of UK gov which improve access to merit goods
and reduce access to demerit goods.
UK government interventions does or did not effectively address the fair provision of merit
goods
There are few interventions which is taken by UK gov fair delivery of merit goods. It also
ensures that people is able to access it properly. But it not fair to say that UK gov does not
intervene in delivery of merit goods. But the fact is that UK gov took several initiative in regard
with these goods and its consumption as well. however, gov feel that there will be under
consumption of goods by people and also delivering it at free of cost. It can be said by certain
provision and policy that is formed of gov. (Krugman, & Wells, 2020). Here, it is found that
there are some program that is initiated by gov. for example- for health care services the NHS is
agency that work to offer health care services as merit goods to people.
Apart from that, it is found that UK gov train social workers, paramedics staff, etc. in
health industry. Thus, some agency and training centre are set up and funded by NHS which
provide training to these people. The main problem faced in this is pricing policy by which merit
7

goods is not easily able to be accessed in effective way. There is another problem that gov face
in this. Here, it is found that decision taken in respect with merit goods to offer it at free of cost
is crucial one. There is dilemma in it that whether any charge is to be taken for that or not. So, if
they are available at free then this can result in over consuming of it. For that quasi good is
taught to reduce merit goods as much as possible.
CONCLUSION
It can be concluded that economics is related to the consumption, production and transfer of
goods, wealth and services in a society. Merit goods are those goods whose consumption benefits
not just the consumer but it also benefits the society at a point. The benefits received by merit
goods are known to the consumer which are his personal utility and satisfaction, but the benefits
by its consumption are unknown to the consumer. On the other hand demerit goods are those
goods which might give utility to the consumer but affects negatively to the society when
consumed excessively. Public goods are those which provide social benefit to people and there
is more consumption of it. Private are those goods which do not provide social benefit to society.
8

REFERENCES
Books and journals
Krugman, P. & Wells, R., 2020. Essentials of Economics, 5th ed. New York: Worth Publishers.
Pp. 285-314.
Paolo, R., 2018. Public Goods beyond Markets. Routledge. 30.
Online
Explaining merit goods, 2021 [online] available through : <
https://www.tutor2u.net/economics/reference/merit-goods>
De merit goods, 2021 [online] available through : <
https://www.tutor2u.net/economics/reference/de-merit-goods>
FERNANDO, J., 2020. Public Goods. [Online]. Available through
<https://www.investopedia.com/terms/p/public-good.asp>
Free Rider Problem., 2020. [Online]. Available through
<https://www.investopedia.com/terms/f/free_rider_problem.asp >
Merit goods., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/Market_failures/Merit_goods.html
Quasi-public goods – definition., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/definitions/quasi_public_good.html >
9