Economics for Business: Study on UK Government's Role in Public and Quasi-Public Goods, Merit and Demerit Goods

This report examines the role of UK government in public, quasi-public, merit and demerit goods in Economics for Business. It analyzes the market failure of UK to provide private goods, positive and negative impact of merit and demerit goods, and UK government's measures to enhance access to merit goods. The report also includes UK spending on welfare programs and measures to provide fair access to public goods.

ECONOMICS FOR
BUSINESS

EXECUTIVE SUMMARY
The report does a study on Business Economics prevalent in UK and the role of UK government
and influence over public. Economic theories and implications for the study have been
examined. Government of UK spending on public welfare measures and analysis of fair access to
the services have been done. The types of goods and services being prevalent in UK economy
have been highlighted. Economic theories depicting the economic situation in UK has been done.
Table of Contents

INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Public, Quasi-public and Private Goods......................................................................................3
Market failure of UK to provide private goods to society with example....................................4
Why is it necessary for the UK government to offer public and quasi-public goods, and how
should it do so?............................................................................................................................4
TASK 2............................................................................................................................................5
Positive and negative impact of merit and demerit goods available in the UK market...............5
Examination of the UK government intervention and strategies to enhance the access of merit
goods and discourage the access to demerit goods using real-world example............................6
Explanation of UK government’s measures effectively addressed the distribution of merit
goods using example and references from the UK in the previous three years...........................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
Business economics is described as a collection of ideas and concepts that can aid in the
overall growth and development of a country's market and economic condition. This study will
examine several economic theories and their implications for the United Kingdom. This project
will involve the projection of public, quasi-public, and other similar commodities. The
government of the United Kingdom has established measures to increase the quality of various
products supply in each market. This study will also look at the effects of various economic
theories on the current economic situation in the United Kingdom.
TASK 1
Public, Quasi-public and Private Goods
Krugman and well mention the economic theories in their textbook to understand the
different types of economic concept and consider himself as a modern liberal. This book has
variety of ideas which contain both positive and negatives aspects and feedback with the help of
which the international economic power can be understandable. The Krugman theory has
followed the detail examination of the policy which is implied for international trade and
finance. The one of the recent theories include New Trade Policy which was updated by the
author to provide the deep challenge to the previous theories. The New Trade Policy of Krugman
explain the trade patterns which themselves act as a consequence of customer preferences. This
theory affects the home market such as UK by encouraging specialization and that is possible by
focusing on certain brands and their production in various countries. The meaning of public,
quasi-public and private goods explained under the Krugman and well textbook are as follow:
Public Goods
As per the opinion of Krugman, the public goods are the products and services which are
basically consumed by whole society and not by only one person. If the UK government wants to
make its country growing and developing than, they must put the proper accessibility of the
public goods. It is because their provide variety of benefits and safety to the society of the UK
and non-availability of this goods give rise of free-rider problem. Example of this goods are
national defence and law enforcement which are non-rivalrous and non-excludable goods. These
good increases the participation of the labour and decreases the poverty rates.

Quasi-public Goods
According to the Krugman, the quasi-public goods have characteristics of both the public
and private goods which are semi-excludable and semi-non-rival. They are partially provided by
the free market because it causes issue after the certain limits. For example, roads which are
restricted with the use of a toll system.
Private Goods
The Krugman also defines the private goods and state that these products and services are
excludable and rival and offers the positive benefits to the consumer and society that consume
them . For example, Food and cloths which are provided by private firms such as Tesco and
M&S and the economy of the UK need this because to increase the efficiency of the country.
Market failure of UK to provide private goods to society with example
Market failure occurs when individual incentives for rational activity do not lead to rational
collective action. According to the Tutor2u Limited Company, 2021, a non-excludable and non-
rivalrous public good (also known as a social good or communal benefit) is one that is both non-
excludable and non-rivalrous, the firm need both public and private goods. Market failure is an
economic situation defined by an inefficient distribution of goods and services in a free market.
A basic illustration of market failure is the issue of public goods. If a product or service is
developed, the producer is unable to restrict its usage to paying customers, and one person's use
has no impact on the consumption of others. Market failures happen when some customers
refuse to pay yet nevertheless use a public good. National defence is an instance of a public good
since all citizens receive the same benefits regardless of how much they spend. On a private
basis, providing an adequate level of national defence is exceedingly challenging.
Why is it necessary for the UK government to offer public and quasi-public goods, and how
should it do so?
The fundamental concern with public goods is that they will be produced insufficiently.
This is due to the fact that the producer, who bears the whole expense of producing the item, is
unable to exclude benefit recipients who did not participate to its production and so are unable to
benefit from many of his creative efforts. It is clear that the private sector will not be able to
supply public goods. The reason for this is because individuals cannot be prevented from

utilizing public goods and cannot be paid a fee for doing so, which is why private firms and
commodities cannot profit from supplying them. The United Kingdom's government must do this
in order to finance and provide public goods in a way that improves society. National defence
and law and order are two of the most essential public goods in today's world, and they are
virtually a need for a healthy nation and community. Economists are largely in agreement that
the government should provide pure public goods and that taxes should be used to pay for them.
2.
Public and Quasi-public goods analysis of problems
They have both private and public goods characteristics which have inclusion of exclusion which
is partial and the examples include roads and bridges. The goods market for them are said to be
incomplete and provision lack can be considered to be failure of market.
Examples of problems
Private enterprise can manufacture bridges and tunnels if charging system can be applied which
can solve the problem of free rider. But it is not likely that need of infrastructure and transport
can be fulfilled in this way. Toll charge may be said as inefficient as traffic may slow for
payment at toll booth, as traffic building up can cause congestion and increase in external costs.
Government is tackling this problem with payment systems which are smart and recognition
technology of numbers which can help eliminate or bring reduction in free rider problem. Over a
period of time, it is said that technology may be able to convert public goods to quasi-public
goods and then to private goods.
UK spending on welfare programmes and public spending are doing a good work in
access to public and quasi goods as the administration has developed infrastructure like bridges
and constructed roads which are of world class standard. This has helped in public getting access
to network of different cities and facilitated traffic channelling and transport. There is estimate of
GBP 41.6 billion in transport by government. Around 45% of GDP goes in public spending.
However, it happens that the citizens which are promised benefits in voting time period, are not
provided the exact amount of goods and the government schemes taking up long time sometimes
does not provide fair access always and there are people who would not like to pay taxes for the
same reason.

The public goods examples include national defence systems, lighthouse protection, rail
safety systems, functioning legal system, flood defence systems, waste disposal systems, street
lighting etc. Quasi-public goods include motorways and roads, bridges, parks, museums like
British Museum, public broadcasting services etc. Private goods include broadband service
providers, food shops, mobile phone provider, car dealers and other consumer good services such
as TV and laptops, health dispensaries, online education etc. These have been the goods
classification in UK economy with every type of good influencing people’s life and the
economy.
TASK 2
Positive and negative impact of merit and demerit goods available in the UK market
Merit goods and their positive impact on society
The degree of development of the UK country is highly favourable because of the various
merit goods such as education, health-care, fruits and vegetables etc. As per the Krugman and
Wells textbook (2020 5th edition) there are various supported economic theories are available
which helps in enabling the economy of the UK to drive in the most favourable path. The
classification of the merit and demerit goods and analysis of their positive and negative impact
on the economy is well-structured and specified by the Krugman via various theories such as
Pricing theory, law of demand, law of supply, elasticity, equilibrium and many more. Education
is one of the merit goods which put positive impact on the economy as it reduces the
unemployment rate of the UK country. It creates stronger economy through creation more and
more productive workers. This also produce the better quality of life to the consumer of the
society that consume it and make their career brighter than ever before. Generally, society
receives strong benefits from the merit goods. For example, vaccination is merit goods after the
covid-19 diseases. But many times, consumer fail to see its benefits because these goods provide
long-term advantage rather than short-term. The government of UK has uses and launches
various interventions to spread the complete information and benefits of this goods to the society
so that stakeholders and entrepreneur make critical decision about how to run businesses and
engage in other economic benefits.

Demerit goods and their negative impact on society
The demerit good are the goods which basically harmful for the health and lifestyle of the
society that consume it. The example of demerit goods as per the Krugman is alcohol, drug etc.
In the Krugman and wells textbook, it is clearly identified that the government of the respective
country such as UK in this case have to launch various intervention to stop and restrict the limit
of demerit goods consumption. It is because it has numerous adverse health effect and negative
social effect such as alcohol drinking is the part of the UK culture which cause various risk of
brain damage and death. In UK, alcohol is a daily drink for the people and it is found out that
from Friday evening to Sunday evening London have the people of continuous stream of
drinkers. This culture needs to end by the government of the UK to make a country heathier and
safer. All the theories of the economic is based and founded on the data and historical events.
Examination of the UK government intervention and strategies to enhance the access of merit
goods and discourage the access to demerit goods using real-world example
The government of the UK launches various policies and benefits to spread the knowledge
of merit goods advantage such as education, health care service etc. The department for
education in the UK has launches various schemes such as SPQEM. This is an education scheme
which are launches by the government to strengthen the teaching capabilities of the formal
curriculum subjects such as Science, Mathematics, social studies etc with the help of enhanced
payment. And for this the UK government provide training to the teachers in every 2 years. By
supporting the appropriate region, the government of the UK has put their concentration and
focus on developing the use of merit goods such as social service, education, health care and
many other services. The constant change in the demand and taste of the consumers forces the
businesses of the UK to make the decision based on scenario analysis rather than the theories of
the economy.
In United Kingdom, the government has launches various financing schemes for the merit
goods and the impact of which the demand of the demerit goods diminishes and this further serve
as a strong deterrent to demerit goods. The demerit good such as alcohol has become expensive
as compared to the merit good and this help the government to affect the purchasing power of the
individual. The people with low and middle income can’t able to afford it because of their basic
need’s fulfilment. The per capital income in the UK plainly demonstrate the people’s enormous

purchasing power. The high prices of the demerit goods and the continuous spreading the
knowledge of harmful effect of these products the individual began to place more effort and
emphasis on using the merit goods and the impact the demand of demerit goods in the UK
market began to decline.
Examples of externalities: The loss of revenue is the negative externalities such as congestion,
driving a car will pollute air which clog the roads. This are basically the external cost which are
need to be bear which constructing the road and this will destroy the beautiful landscape.
Explanation of UK government’s measures effectively addressed the distribution of merit goods
using example and references from the UK in the previous three years
The UK's Middle East Minister, James Cleverly, underlined the importance of Jordan's
long-standing alliance during his first official visit to Jordan. In line with section 121 of the Data
Protection Act 2018 (“DPA 2018”), the Information Commissioner's Office (ICO) submitted its
Data Sharing Code of Practice to the Secretary of State on December 17th. The government's
involvement exacerbated the negative effects. Government intervention in the merit goods
market might have both positive and bad consequences. The beneficial impact of government
intervention is such that it has the potential to promote the growth and development of various
entities involved in merit products. In certain cases, the rates charged have been decreased from
what they would have been otherwise, with patients only contributing a part of the treatment
expenses and the government covering the rest through supplier subsidies. It is critical for the
government to maintain its engagement to a minimum. For example, in the United Kingdom,
government policy might put more stringent restrictions on educational establishments and other
merit goods, limiting the organizations’ The Code addresses transparency, the legal basis for
using personal data, the accountability principle, security, and preserving a record of processing
activities if data is exchanged between two or more controllers. Data exchange with processors is
not mentioned in the Code. ability to steer the course of activities in their particular markets.
CONCLUSION
From the above-mentioned report it has been concluded that this may imply that economic
theories impact decision-making, but company houses should use a more situational approach to

enhance economic flow or activity. The performance of items on the market is influenced by a
variety of indirect components or circumstances. The government's participation in the merit
product in the United Kingdom is quite important. It's critical for the market to have some
openness.

REFERENCES
Online
Tutor2u Limited Company, 2021, Public Goods and Market Failure, Available through <
https://www.tutor2u.net/economics/reference/public-goods >
investopedia team, april 7, 2020, Market Failure, Available Through,
<https://www.investopedia.com/terms/m/marketfailure.asp>
Financial Times newspaper <https://www.ft.com/uk-business-economy>
The Guardian newspaper < https://www.theguardian.com/business/economics>
UK office of National Statistics < https://www.ons.gov.uk/>
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