Public and Private Goods in the UK Economy

This report discusses the concept of public and private goods in the UK economy, including their importance and the challenges faced by the government in providing access. It also explores the concept of merit and demerit goods and the government's policies to improve access to merit goods. Examples and real-life cases are provided to illustrate these concepts.

ECONOMICS FOR
BUSINESS
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Contents
INTRODUCTION...........................................................................................................................2
TASK-1............................................................................................................................................2
Q.1...................................................................................................................................................2
Public goods:...............................................................................................................................2
Private goods:..............................................................................................................................2
Quasi-public goods:.....................................................................................................................2
Why UK economy require public, quasi-public and private goods.............................................3
UK government and failure to provide access to private goods..................................................3
Why and how UK government must provide access to those goods...........................................3
Q.2...................................................................................................................................................4
UK government face difficulties in providing sufficient access to public and quasi-public
goods............................................................................................................................................4
UK public spending and social welfare programmes..................................................................5
TASK-2............................................................................................................................................5
Q.1...................................................................................................................................................5
Merit goods:.................................................................................................................................5
Demerit goods:.............................................................................................................................5
Merit and demerit goods in the UK market and real-life examples............................................6
Q.2...................................................................................................................................................6
Policies and funding which improve access to merit goods........................................................6
UK government discourages and reduce access to demerit goods..............................................7
Q.3...................................................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
Demand and supply are two important aspects with respect to economics and economy.
Public goods are those that bring benefits to all of us, however private goods are just opposite
and is totally related with the market and its situations. Enabling access to public goods and
maintaining access with respect to private goods is all related with the government policies and
intervention. This report will discuss the concept of public and private goods along with an
explanation of requirement and balance of these goods in the economy. Likewise, concept of
merit and demerit goods along with government policies and programmes with respect to raising
supply and demand of merit goods will also be included in this report.
TASK-1
Q.1
Public goods:
According to Young (2021) public goods are those goods that benefits many other people
without consideration towards payment, concept called non-excludable goods. Those public
goods are presented also as non-rival in consumption. This means that there is no consideration
that there will be dependency of benefits of one person towards another. Public goods cannot be
efficiently supplied by market. It is made available for all the member of the society
(FERNANDO, 2020). An extended range of examples falls in this category of public goods as:
police control over a community to control crime and vandalism, public radios, street lighting.
Private goods:
Private goods are those goods whose ownership is related and restricted to the actual
owner. This means that these goods are someone's personal goods and own by that individual
only and as Krugman, et al (2020) presents the private goods as an opposite of a public goods.
Quasi-public goods:
“These are those goods that have characteristics of both the public and private goods
“(Quasi-public goods – definition., 2021). This means that they possess partial rivalry,
excludability. These goods have capacity and characteristics of both the public and private
goods.
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Why UK economy require public, quasi-public and private goods.
With respect to UK economy there is a requirement of both the public and private goods
because as the public goods are non-excludable and nonrival which make it important for UK
economy to carry on its supply in market. This is also because of cost benefit analysis wherein
cost and social benefits are determined and supply of public goods are carried on. However, in
case of private goods which are excludable and rival which itself make it necessary for the UK
government to run its supply because it is the lead to market. It is also to be noted that when the
goods will be non - excludable then free rider problem in terms of non-payment to producers will
arise (Krugman & Wells, 2020) and as a result the production will be affected. However, in case
if minimum cost will try to be paid to producers, then consumption will decline. In consequence,
private goods enable the balance in the market and run the economy of the UK along with its
supply. These goods also create certain level of competition which will itself create the market
and the economy will be able to run.
UK government and failure to provide access to private goods.
UK government failed to access private goods when marginal social benefits equal to
zero. This means that the benefits that arise out of production and consumption of goods with
respect to environment is zero. As if the government will not intervene then it will lead to have
an increase in the pollution level and the private goods production will continuously raise this
percentage. Hence, when it sees that the level of pollution raised at extensive state around 1960
and 1970 then, environmental standards come into force. Clean Air Act, 1970 is such an example
of it (Krugman & Wells, 2020). Pigouvian taxes are also a set example that was imposed by
government of UK with respect to marginal benefits and cost concept and thereby again related
with the production of previously mentioned goods.
Why and how UK government must provide access to those goods.
As public goods are non-rival and non- excludable which make it important for the
consumer to have consumption without making payment for it. (Pettinger, 2019) It is to be noted
that as these involves greater percentage of social benefits in comparison of cost, so its
production and distribution is supported by government too. As it does not involve payment of
money by the consumers so it will lead to dissatisfaction among the producers, and it does not
mean that its importance will decline. As to make the entire city clean there is need of public
sewage system. Although personal payment is not included in this, nonetheless its benefit will
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make the entire city healthy. Same in the case of public goods too, its benefits in terms of
societal advantage are too high that will lead it an encouragement in its production. Although
private goods run the market and make the market efficient however the satisfaction of needs of
few individuals will not be enough in comparison with the public. Hence, public goods are being
supported by the UK government. Along with government its distribution is further supported by
self-interested individual, voluntary contribution and various other too.
In addition, of this it is also to be noted that the UK government also need to focus on the
cost benefit analysis that will act as base for taking decision regarding the support of public
goods. As these goods are also related with the disease prevention, national defence, scientific
research so its benefits are quite high in comparison of private goods with respect to country. For
this reason, also government of UK support public goods.
Q.2
UK government face difficulties in providing sufficient access to public and quasi-public goods.
The UK government face difficulty with reference to providing access to public goods
when the free-rider problem raised. This means that to grab the goods people, started free riding
and think that as the goods are available for free of cost so it would be easy to them regarding
access (Free Rider Problem, 2020). This means that with the imposition of prices and costing the
consumption of the public goods decline. This is the phase when the government of the UK face
difficulty to access the public goods. As it is a fact that when the people will get the free access
to the public goods then it will not only have an impact over the market, but the producers will
also be affected. Hence, this is the situation when government face difficulty. For example, UK
faces difficulty in providing railway facility free of cost to public. They have privatized their
railway because of which it has become difficult for public to access railway in lower cost (Can
Britan ever fix its privatized railway, 2021).
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UK public spending and social welfare programmes.
UK social welfare programme has adequately delivered the fair access to public goods. This
can be understood as free and fair access with respect to public goods including goods used for
scientific research, defence or for disease prevention. According with BBC News (2021),
government intervene and approved a vaccination plan to offer protection to adults over 50
before UK winter. As the government policy based on the concept of marginal cost and benefit
analysis, so with the inculcation of this concept the UK government has justified the access to
public goods. This can also be understood with a current example of Covid pandemic wherein
the UK government policy and programme enable access to public and private goods too. As
under this pandemic situation when there is a greater need of the public or lifesaving goods the
government has made full support to it. Likewise, private goods in terms of those which are
rivals are also supported by the government to run the market and the economy. Examples of
private goods can be explained as broadband services, phone providers etc. According to GOV
website (2021), the government launches a 5 billion pounds project to boost the UK broadband
as more than one million houses do not have access to a reliable internet. 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. 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
Q.1
Merit goods:
These goods are those which are under produced and under consumed regarding free
market. As Young (2021), present the merit goods as goods which generate a greater good for
society. For example: health care, education, housing, welfare services, public parks, protection,
and various others. These goods are provided in free market but with insufficient quantity
(Pettinger, 2017).
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Demerit goods:
According to Young (2021), the demerit goods are those goods which negatively impact
the consumer and produce a greater harm for the society. In other words, consumption of these
goods are unhealthy, degrading or socially undesirable. For example: alcohol, cigarettes, drugs,
and various others.
Merit and demerit goods in the UK market and real-life examples
In addition of this with respect to merit goods in terms of health care, or welfare services
or protection services that are enabled by the government may have a positive impact towards
the health or the life of the people. As this can be understood with an example of covid pandemic
wherein merit goods in terms of heath care and protection is provided by UK government have
put a positive impact over the society in terms of fighting from pandemic.
However, this can be contrasted with the example of demerit goods wherein government
make ban over the consumption of goods that are related with smoking, drinking, drug abuse and
various others. These are being banned and restricted with the purpose of ensuring healthy life
among people and reducing the negative and adverse impact towards health. One of the
examples of merit and demit goods is education. It is considered as a merit good because in UK
various universities provide scholarship to students in UK. But on the other hand it is a demerit
good as well because according to BBC news many students in UK are buying essay from essay
writing companies which is fuelling plagiarism (Overseas students 'buying essay, 2021).
Q.2
Policies and funding which improve access to merit goods.
As merit goods are used and determined as those goods which may bring benefit to people
so to raise its consumption government of UK has made various policies and strategies with
regard to increased consumption of merit goods. This can be well justified with voucher system
that is being associated with education merit goods. Under this system voucher is allowed by the
government of UK to the parents by which they can make combination of their finance with
voucher in terms of benefit may avail education as merit good for their children. However,
enabling price free goods in would also be termed as merit good but as it does not include the
price element so it will lead to have an overriding demand. And as a result, production become
difficult so quasi good concept was launched by government to enable merit goods with certain
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price element. Government working and intervention with the concept of NHS is also a move
that enable education to children in UK and as a result merit goods are delivered among masses.
Enabling pension scheme is also counted as a good move of government towards enabling merit
goods to people. As this include the concept of individual income involvement so enabling
pension among the individual is a good example of merit goods. Making of provisions and
enabling health care services at free of cost is also an example and move of government towards
the concept of enabling merit goods.
UK government discourages and reduce access to demerit goods.
However, regarding demerit goods which are harmful with respect to its consumption
government also include various moves and made various policies so that the demand curve of
demerit goods would come to left. As demerit goods carry negative externalities like if a person
smokes, then it will affect that person itself (Pettinger, 2019). Negative advertisement is one of
the campaigns produced by the government with respect to demerit goods. Under this campaign
negative advertisement in terms of harmful impact of consumption of alcohol and various other
demerit goods are shown. Imposition of heavy taxes is also a move of government with respect
to reduction of the consumption of the demerit goods. With the imposition of heavy duties, the
consumption of the demerit goods like liquor, cigarettes are tried to be reduced. Imposition of
legislation like Prohibition law of USA and various other are also engaged so that the
consumption of demerit goods will be mitigated and reduced. UK government has taken an
initiative to cut sugar out of food in order to reduce its consumption ad for this they have
developed levy sugar tax (Efforts to cut sugar out of food way off target, 2021). Also, UK
government has taken an initiative to rethink that drug policy in order to reduce consumption of
drugs within localities of UK and has taken a health based approach for reducing drug misuse
(Drugs: Government adviser to urge more focus on health of users, 2021).
Q.3
It would be wrong to said that there is no intervention of government with respect to
merit goods. In-fact UK government take many initiatives and steps with respect to merit goods
and its consumption. With reference to these goods government feel that people will under-
consume or it need to be provided at free of cost (Explaining Merit Goods, 2021). This can be
understood and supported with may provisions and policies of the government with respect to the
merit goods. As the government of UK operate its services and programmes with respect to merit
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goods through various agencies including NHS or through other programmes too. UK's
government also enable the free training to doctors, nurses, teachers in order to make
contribution towards the merit good of education and healthcare. Likewise, government also
enable funds to the private hospitals and private schools so that number of beds and sets will be
raised, and better healthcare and education will be enabled by the people as a merit goods. As if
the goods will be enabled at free cost then it will lead to overconsumption. Thus, an involvement
of quasi goods was inculcated so that better rendering of merit goods will be possible.
As there are two options with respect to goods that its supply will be increased with an
increase in demand. To raise the supply of the merit goods government of UK integrated various
grants and subsidies with respect to its production. This can further be understood as integration
of tax benefits, enabling grant to produce merit goods and many more are included in this.
However, these subsidies and grants are financed by the taxes which are borne by the local
people (Merit goods, 2021). This strategy of government has raised the supply of merit goods of
healthcare, education and various other. Likewise, some other public goods including the roads,
bridges, airports are also maintained by the government with the involvement of tax revenue.
Likewise, demand is also raised by the government with respect to merit goods with the
involvement of reduced prices in tuition fees of universities, so that education will be promoted.
Enabling free treatment of contagious diseases in hospitals, use of public awareness campaign so
that better publication and demand of merit goods can be raised.
Therefore, with such policies and programmes government address fair provision with
respect to merit goods. This initiative taken by UK government has definitely heled then in
addressing fair provision of merit goods and has further helped in raising £154m (Sugar tax on
soft drinks raises £154m, 2018).
CONCLUSION
From the above report it can be concluded that there should be a balance between the
supply and regularization of public as well as private goods so that societal benefits along with
economic balance can be established. This need has given rise to quasi goods that possess the
characteristics of both the goods. Likewise, making of provisions with respect to increase in
supply of merit and decrease in consumption of demerit goods is also understood about this
report.
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REFERENCES
Young, M. R., 2021, PowerPoint slides and videos, lecture slides, EFB MOD3327, slides 26-
27, Anglian Ruskin University delivered 17 June 2021.
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July 2021
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2021
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June 2021
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2021
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July 2021
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Drugs: Government adviser to urge more focus on health of users. 2021. [Online]. Available
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Efforts to cut sugar out of food way off target. 2021. [Online]. Available through: <
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