Impact of Economic Theories on UK Economy | Desklib

This report discusses the impact of different economic theories on the UK economy, including the requirement of public, quasi-public, and private goods, accessibility to public and quasi-public goods, and the merits and demerits of economic theories.

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Table of Contents
INTRPDUCTION............................................................................................................................3
TASK 1............................................................................................................................................3
1. Requirement of Public, Quasi-public and Private goods in UK economy..............................3
2. Accessibility to public and quasi-public goods.......................................................................5
Task 2...............................................................................................................................................6
1...................................................................................................................................................6
2...................................................................................................................................................7
3...................................................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................1

INTRPDUCTION
The business economics is defined or a sum of various theories and concepts that can
support the overall economic growth and development of the market and economic situation of
the country. This report will discuss about the different economic theories and its impact over the
United Kingdom. The projection of the public, quasi public and other such goods will be done in
this project. The policies formulated by the government in United Kingdom to improve the
betterment of the different supplies of the goods in respective market. The impacts of different
economic theories in United Kingdom economic scenario will also discuss under this project.
The involvement of the United Kingdom government in the supply of merit goods will also
direct under this project or report. The impact of the government involvement in the merit
products will be discussed at a critical level.
TASK 1
1. Requirement of Public, Quasi-public and Private goods in UK economy
The requirement of three type of goods is as follow:
Public Goods: The public goods are the product and services which is consumer by the large
society as a whole and not only by a single individual person. In order to manage and grow the
economy of the UK and became a developing country, the UK government have to access the
proper availability of the public goods (Dittmar and Meisenzahl, 2020). For example, law
enforcement national defence etc. which are basically non-rivalrous and non-excludable goods
and it is require for improving workforce participation, reduce rate of poverty.
Quasi-public Goods: The quasi-public goods have characteristics of both private and public
goods and are the goods which provide benefits to public but also cause harm to the public health
that’s why need restriction after certain limit. For example: roads, tunnels and bridges. It is
required for UK economy to solve the problem of free rider which arises in case of public goods
and also important for the operation of price mechanism. The free-rider is a problem where
individual have an incentive to use goods without contributing towards the cost of production
and construction.
Private Goods: The private goods are basically rivalrous and excludable including non-
excludable which provide positive benefits to the public that consume it such as food, cloth etc.
The UK economy require these goods for the improved efficiency as private companies of the

UK such as Tesco and Sainsbury have a profit incentive which needs cost cutting and increase
efficiency (Dittmar and Meisenzahl, 2020). Along with that the private goods sales also help the
government in generating revenue via tax from the private sectors and invest them for economic
development.
UK market failure to provide private goods with example
As per the Keynes theory, the market failure is occurred when the natural inefficiencies
occurs and that because of the supply of goods not met with the demand of that particular goods.
This is a situation when UK market fail to provide the accessibility of necessary private goods to
the public. In this, the negative externalities from production are the main reason which arises
when the social marginal are higher than the private marginal cost. The example of this includes
River or Sea pollution which arises because of the waste discharge from the private factories.
Along with that in UK the market failure causes after the covid-19 situation and the reason
behind this is inefficient supply of the private goods (Barron and West, 2017). The
overproduction of daily use goods by private industries unable to supply it to the ultimate
customers because of the non-availability of transport facility which causes the UK market
failure.
Why and how the UK government must provide the public and quasi-public goods
Providing the public and quasi-public goods to the society is the main function of the UK
government because this are the non-excluded and non-rivalry goods. The government of the UK
must do this to financing and provisioning of the public goods in a manner that make the society
a better place to live. In today’s world, the public goods such as national defence and law &
order are one of the most important and are almost a prerequisite of a health nation and society.
In order to provide the public and quasi-public goods to the society, the UK government need to
pass the various provisional acts because both national and local government have public goods
responsibility. Without the efficient provision of public and quasi-public goods the UK economy
and society will never prosper (Gómez-Zapata, Espinal-Monsalve and Herrero-Prieto, 2018).
Along with that the UK government also privatize the public goods in order to eliminate the
problem of free-rider and the impact of which competition in the public sector increase and it
reduces the price of public goods and increases efficiency.

2. Accessibility to public and quasi-public goods
The UK government fail to provide the accessibility of public and quasi-public goods to the
public of the UK government because of the inadequate public goods which are not provided by
the marketers because of the free rider issue. The UK market also fails because of the different
income level of the individual which further created the gap in living standard between the
different groups of the economy. That’s why the public policies are one of the steps which is
taken by the government of the UK correct the market failure and provide the efficient public
and quasi-public goods to the society at reasonable cost so that all criteria of individual can enjoy
it (Donati, 2019). For example; In UK around 18 new roads that need to be completed over the
period of the 2021 to 2026. Another example of this is that in UK there is high demand of
healthcare but because of the consistent struggle of the government they are unable to meet that
demand and unable to provide the public goods to the society of the UK.
UK spending and social welfare program efficiency and sufficiency
No, it is not true that the UK spending and social welfare program is not enough to provide
the full accessibility of public and quasi-public goods to society. It is because after the Brexit, the
UK government launches their own British Agricultural policy for the farmers and consider it as
an opportunity to put the public goods at their heart. This is commonly known as “Public Money
for Public goods”. The government of the UK offer various funding options such as Grants,
annual payments etc. to the farmers that want to manage their land and also support their land
from the biodiversity, flood alleviation, water purification etc. Not only that, in order to provide
the accessibility of public goods the government adopted the environmental indicator and model
with the help of which they can easily and effectively provide the funds for the provision of
goods (Sohrabi and et.al., 2020). This simple reallocation of the funding is generally not
sufficient to achieve the desired level of public goods but it must boost the growth of the UK
after the Brexit.

Task 2
1.
Economic situation of country is totally influenced with various theories and models of
economics that can empower and bring the economy to the most positive level of change.
Krugman and Wells textbook (2020 5th edition) support and project the different economic
theories that can empower the economy to drive in the most positive direction. The role of
economic theories is such that it allows the stakeholders and government to make important
decisions to derive the best suitable decision making for the business operations and various
economic activities. The editorial supports the economic theory such as pricing theory. This
theory indicates that if the price of the product get increases than it would certainly decrease the
demand of the product under respective market (Banalieva and Dhanaraj, 2019). The pricing
theory has certainly and clearly depicted the fact that in case the price of th products in market
get an increase than this would certainly decrease the demand of the product under respective
market. Another theory depicted is elasticity of demand in market. This economic theory is all
about if the price of one product in market get increases than this would certainly increase the
demand of the alternative product in the same market. For example in case the price of tea
increases than this would boost up the demand of the coffee in market. This is an important
economic concept that certainly supports the people or potential customers in market to switch
the demand and need. As this economic theory support ythe fact that people make all the
procurement related decisions on the basis of the income of the respective entity. As per the
concept of economics this is also predicted that the price of the product do not create an impact
over the demand of the luxury products and goods. This is an important concepts of economics
that if the price of any of the luxury good than this wont influence the demand of the respective
product in market. As this has been assumed that when it comes to take on the purchase related
decisions about luxury item customers do not look at the prices on a priority basis.
Merits of economic theories
The role of economic theory is very significant in nature. The economic theory like
pricing theory of economics, law of demand, law of supply, elasticity and many such concepts
support and favour the business entities to achieve and mitigate the overall business objectives in
the best way possible. This is important for every business unit to make decisions that can
empower and support the organisation and business unit for taking on the besyt level of impact in

market with support of policies and decisions taken. It is important that these economic theories
make it more significant for the business unit to enrich the overall business objectives in the best
way possible. For example in the year 2018 when the prices of the tea get a significant hike of
approximately 12% people stated to switch over the coffee products (Hopkin, 2017). There are
many other examples can also witnessed where the changes and the impacts of the economic
theories can be easily seen. The economic theory also plays a huge role in boosting the economic
condition or situation. Over the period of time economic of United Kingdom has been stable and
well strong in nature. Economic theories put a huge impact for the government and stakeholders
to gain the proper stability in the economic condition and position. Currently the economic in
United Kingdom is growing at a rate of approximately 2%. This is very impressive in nature as
in context to the developed economics this is a huge number to be achieved in respect to the
growth of gross domestic product.
Demerits
The economic theories are all based on the past incidents and records. Any change made
in the theory belongs to the previous condition or event of economy. This is a huge demerit
associated with the economic theories as the business environment is a constant changing
environment or factor (Malecki, 2018). The constant changing nature of the business
environment always influences and challenge the final conclusion drafted based on the different
economic theories. For example irrespective of any increase in the luxury product people and
customers keep on focusing over buying the respective items and products. Many other examples
can be seen where the economic theories are challenged at a huge level.
2
Government in United Kingdom followed the policy where it has focused and
emphasised over funding option to enhance the access of the merit good. Government has
focused over advancing the health care, welfare services, education and other such merit goods
or products by funding the respective area. This is important for the businesses to make a stable
decisions in business. Changing nature of business environment do not empower the entities and
government to make a stable decisions that can support and empower the best level of business
decisions. This is a strong demerit of the economic theories as it do not let the business entities to
support and guide the best level of policy making in business. Constant changing nature do not
let the entities to focus over the economic theories and more taking decisions on the basis of the

situation analysis prospect (Bessant, Farthing and Watts, 2017). Also in United Kingdom per
capital income clearly show the huge buying capacity of the people. This certainly demerit the
concept related to pricing, elasticity and such other. The government in United Kingdom has
started to advance the merit good and products in market. This could also support the improved
life style of people in market. It is necessary for the government to advance the different public
sector so that better growth possibilities can arises out of the practices and strategies developed.
The policy related to funding merit good could significant discourage the demerit goods.
As people started focusing more over the use of merit good that could effectively decrease the
demand of the demerit goods in market. The strategies and policies of government put a huge
impact in approaching the market in more economic manner and strategically deliver the
business operations (Shahbaz and et.al., 2017). For example government in United Kingdom
started providing funds to different entities aiming to operate business operations under the
education or any other merit product sector. This could improve the focused of the people to
entertain the best level of practices. This involvement of government could rise the overall
growth possibilities of different sectors associated with the merit products and goods.
3.
Intervention of government in the merit goods could create both positive and negative
impacts. The positive impact of the intervention of government is such that it could improve the
growth and development of different entities engaged under the merit goods. The intervention
could increase the supply of the merit goods as the market become easier, resources are
sufficiently and easily available and many other positive changes are entertained due to the
involvement of the government in the supply of merit products. The involve of government also
created the negative impacts. This is essential for the government to keep the involvement
limited (McKee and Stuckler, 2020). As for example the governmental policy in United
Kingdom could imposed more strict laws over the educational institutes and other merit products
that could at some level restrict the entities to guide the direction of operations under respective
market.
CONCLUSION
This can project that economic theories influence the decision making but there must be
more like situational approach should be taken by the business houses to boost up the economic
flow or activities. There are many indirect elements or factors that influence the performance of

the products in the market. The involvement of government in United Kingdom for the merit
product is very critical in nature. This is very important and crucial for the market that it contain
some free approach. Government involvement could restrict the entire sector at a huge level. The
funding related issues could get resolved after the involvement made by the government in merit
products and goods.

REFERENCES
Books and journals
Dittmar, J. E. and Meisenzahl, R. R., 2020. Public goods institutions, human capital, and growth:
Evidence from German history. The Review of Economic Studies. 87(2). pp.959-996.
Barron, D. N. and West, E., 2017. The quasi-market for adult residential care in the UK: Do for-
profit, not-for-profit or public sector residential care and nursing homes provide better
quality care?. Social Science & Medicine. 179. pp.137-146.
Gómez-Zapata, J. D., Espinal-Monsalve, N. E. and Herrero-Prieto, L. C., 2018. Economic
valuation of museums as public club goods: Why build loyalty in cultural heritage
consumption?. Journal of Cultural Heritage. 30. pp.190-198.
Donati, P., 2019. Discovering the relational goods: their nature, genesis and effects. International
Review of Sociology. 29(2). pp.238-259.
Sohrabi, H. and et.al., 2020. Soil recovery assessment after timber harvesting based on the
Sustainable Forest Operation (SFO) perspective in Iranian temperate
forests. Sustainability. 12(7). p.2874.
Banalieva, E. R. and Dhanaraj, C., 2019. Internalization theory for the digital economy. Journal
of International Business Studies. 50(8). pp.1372-1387.
Hopkin, J., 2017. When Polanyi met Farage: Market fundamentalism, economic nationalism, and
Britain’s exit from the European Union. The British Journal of Politics and
International Relations. 19(3). pp.465-478.
Bessant, J., Farthing, R. and Watts, R., 2017. The precarious generation: A political economy of
young people. Taylor & Francis.
McKee, M. and Stuckler, D., 2020. If the world fails to protect the economy, COVID-19 will
damage health not just now but also in the future. Nature Medicine. 26(5). pp.640-642.
Shahbaz, M. and et.al., 2017. The CO2–growth nexus revisited: A nonparametric analysis for the
G7 economies over nearly two centuries. Energy Economics. 65. pp.183-193.
Malecki, E. J., 2018. Entrepreneurs, networks, and economic development: A review of recent
research. Reflections and extensions on key papers of the first twenty-five years of
advances.
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