A Detailed Analysis of Private and Public Goods in the UK Economy

This essay provides a detailed analysis of private versus public goods within the UK economic context, addressing the characteristics of quasi-public goods and the reasons for market failures. It explores the role of price mechanisms, demand, and supply in the provision of these goods, highlighting issues such as the free-rider problem. The essay also examines the difficulties faced by the UK government in providing sufficient access to public and quasi-public goods, alongside the concept of merit and demerit goods. Furthermore, it discusses government interventions aimed at improving access to merit goods and discouraging the consumption of demerit goods, ultimately impacting the UK economy and its citizens. Desklib offers students access to a wide array of similar solved assignments and study resources.

PRIVATE VS PUBLIC
GOODS

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK-1 ...........................................................................................................................................3
Q.1 ...............................................................................................................................................3
Q.2................................................................................................................................................4
TASK-2............................................................................................................................................6
Q.1................................................................................................................................................6
Q.2 ...............................................................................................................................................7
Q.3 ...............................................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Debate about the suitable boundaries between private and public activity is consider as
long standing. There is relatively little information or data on the actual balance between private
as well as public goods. Even within different areas which may be considered traditional good or
service. There is substantial and seemingly growing the significant role of private sector in
providing better good services.
TASK-1
Q.1
Quasi- public goods have characteristics of both public and private goods, including
partial rivalry, partial excludability, diminishable and reject ability. They are nearly public goods
(Quasi Public Goods, 2021). For purpose of UK economic condition maintenance which requires
to consider public, private and quasi-public goods. These are fulfilling all essential need of
requirement of markets.
For example- Roads, tunnels, bridges etc. there is a lack of provision by free markets
would be considered to be in-efficient and market failure. This kind of situation may arise due to
lack of availability of good and services. Therefore, it is directly affecting overall performance
and efficiency of economic condition in UK.
For example- private enterprise could provide the facilities of bridges, tunnels, roads if in
case, it would be applied charging system, which can resolve free rider problem. However, it is
unlikely that all need of economy’s regarding transportation, infrastructure development. On the
other hand, an advancement of modern technology is not only supports to recognise problem and
issue but it may be reduced or eliminated price mechanism. Hence over time, modern technology
can easily convert public goods to quasi-public goods. Eventually to private goods. These are
consider continuous process or method to maintain coordination between enterprises.
By using Economies theories
Economic theories are defined the social science that deals with problem of allocating
limited resources and satisfy unlimited demand of people. in case, if solving the price, cost
mechanism which turn, uses forces of supply & demand for private, public goods. Price

mechanism is basically describe the adjustment at the time of goods serves as a signals to both
sellers & buyers. It is often considered the microeconomic theory.
Public goods provide an example of market failure in UK because of missing the actual
presence regarding market value. It is more efficiently and fairly provided as collective
consumption by state-wise. In UK market, public goods, and private market may fail to supply
items from one place to another in optimum quantity.
According to theory of demand, supply and price mechanism, the demand for particular
good by individual consumer which is based on the important factors. A pure public goods are
not only provided by private enterprise because it is unable to supply maximum profits. But
sometimes, it depends on the government where how they can make an important decision
regarding demand, supply and price mechanism. Afterwards, it will be generating an accurate
result or output. The example of UK market fails such as free-Rider problem. It is one of the
problem may arise because of public goods which are non-excludable and difficult to charge
individual people for taking more advantage once an item is available in market (FERNANDO,
2020). The Free rider problem leads to under provision of good and it causes UK market failure.
The Consumer’s income also identifies how much of private good and public goods. It is able to
buy and given that all factors remain constant.
According to monopolistic competition market theory, it has been determined another
reason for failure is changing nature of public goods. In some situation, modern technology are
causing a blurring of distinction between private as well as public goods. For example-
encryption technique allows supplier to exclude the non-payers, although, product or goods
remain non-rivals. On the other hand, the open source or creative commons have required more
information or data related to the public goods in nature. As in case of perfect competition,
private, public enterprises are basically focused on innovative features so that it become easier
for differentiating items.
Q.2
On the basis of evidence, it has identified when UK government has difficulty in
providing sufficient access to public goods and quasi-public. The problem may arise due to
market failure in the economic situation. It can be defined an inefficient distribution of goods and
service in free market. The government also find difficulties and issue with regard to accessing

public goods and quasi-public goods when the situation of free-riding occurs and people deny to
make payment for the consumption to goods. However public goods being used for the welfare
of the general public and country as whole need to be continuously supported by government. As
people become habitual with the consumption of public goods but a slight charge in prices will
lead to have reduced consumption which will arise as an issue with respect to government
because they are the sole body which makes investment in public goods. However, with respect
to making fair access to public goods an adoption of the marginal social benefit would be a right
option. This will enable the government to make analysis of the benefits based on its cost. This
means if spend cost will bring adequate percentage of profit then it will be a right choice to
make investment by government.
Another example of facing difficulty in analysing the benefits. This means while making
an investment in public goods government need to make cost benefit analysis. Here analysis of
cost is an easy concept while its determination of benefit is hard. Thus, government again face
difficulty in determination of benefits that will arise by making investment in public goods.
Likewise, an example of New Jersey under which an investment related with public
transportation is declining in the recent years. In 2015 the contribution of state was recorded to
be just 10% of 2009. Capital investment was also plunged by 20% with an increase in rider-ship
by 20%. This has resulted in over crowed buses and transportation (Krugman & Wells, 2020).
Likewise, in 2016. Spending of government with respect to local infrastructure, water treatment
plan, roads, highways and various other was very low in the past 30 years in New Jersey. With
its decreased investment in infrastructure, American infrastructure received a D+ report from
American Society of Civil Engineers (ASCE).
Thus, with the decreasing people's free-riding issue and consumption of services enabled
by the government at free of cost, government also started facing difficulties with respect to
making investment in public goods. However, with the concept of quasi public goods the issue of
the government has been resolved at certain extent because of its unique characteristics of having
a quality of public and private goods. This will lead to have an increased contribution of people
along with minimizing the issue of free-riding.

TASK-2
Q.1
Merit goods:
These goods include those goods that are assumed to be under-consume by people
(Explaining Merit Goods, 2021). These are provided at free of cost and are subsidized. These
goods are provided from the government so that people will consume those goods on the basis of
need rather than ability and willingness to make payment for it. With the help of merit good
benefits are not created only on the private basis but it will lead to societal benefits too.
Example and their positive impact:
Education, Healthcare services welfare services, fire protection, public park are all
counted as merit goods (Merit goods, 2021). Enabling these goods and services have a direct and
major positive impact towards the society as whole. As these are either provided at free of cost or
at subsidized rate so this will lead to have a creation of public benefit. On a broader scale it
positively impacts the entire concerned economy and country as whole. This is because when
people of a specific country and economy will be well-educated and knowledgeable then it will
lead to have a creation of betterment and growth of the entire country as whole.
Demerit goods:
Demerit goods are those that have an adverse and negative impact towards the health of a
consumer. These goods or services includes those whose consumption is counted as unhealthy
and degrading because of its negative impact. Consumption of demerit goods proves to be bad
for an individual (De-Merit Goods, 2021).
Example and their negative impact:
Cigarettes, alcohol, tobacco, junk food and various other goods fall in the category of
demerit goods. This goods have a sever negative and adverse impact over the society and the life
of consumer who make consumption of it. For example if a person drink alcohol and make
driving then it is not only putting its own life in danger but it may create danger to other also
(Demerit goods, 2021).
Thus, from the above examples and explanation of the merit and demerit goods, it is
analysed that these goods have are contradictory to each other. This is because as merit goods
like education, healthcare and various are creating positive impact towards the consumer and the

society at large in the form of enhancing standards and growth, however consumption of demerit
goods including alcohol, cigarettes may lead to bring adverse and negative impact towards the
heath of the consumer and the society too.
Q.2
Improvement in the access of merit good
As merit goods are proves to be beneficial for the economy of UK and the country as
whole so it is made mandatory from the perspective of UK government that they make and adopt
adequate initiatives and steps so that they can encourage the delivery and access of merit goods.
For this government may use the tax revenues in order to fund the public goods. As tax is one of
the major sources of government income so utilizing the tax as a revenue source government
may use it to have a rise in access to merit goods. Likewise, in case of enabling education as
public goods, grants are also being given from government so that the schools will be able to
enable and deliver education as merit goods to majority of beneficiaries. UK's government also
entitle tax subsidies to private schools so that they can deliver merit goods to students (Merit
goods, 2020). Subsidies in the form of funds, grants, tax exemption in the form of entitling
charitable status are included. Likewise, implementation of measures including compulsory
education for every person, enabling insurance schemes like Medicare so that health of people
will be improvised, use of social media or digital platform in order to enable and raise the
information of merit would also be taken in order to raise demand of the merit goods.
Discouragement in the access of demerit goods
In order to discourage the access towards the consumption of demerit goods includes
raising the percentage of taxes. This will lead to have a raise in prices and ultimately
consumption of demerit goods will be reduced. This can be easily understood with an example of
alcohol and tobacco wherein with the imposition of high taxes their consumption are trying to be
reduced (Government intervention, 2020). Likewise, imposition of regulation in the form of
setting up of minimum age limit for the consumption of alcohol consumption may also work
towards reducing the consumption of alcohol. As demerit goods have an adverse and negative
impact towards the health og individual so in order to reduce the consumption and use of demerit
goods imposition of high taxes and legal regulations would count as major and successful move
of UK government. In the same way an implication of laws like ban on smoking right from July

2007, Health and safety at work act, legislation related with consumer protection and various
other laws also work in this direction.
Thus, with this discussion it would not be wrong to said that the government has taken
many moves and steps toward the consumption and delivery of merit goods and minimising the
use and consumption of demerit goods. These are to be done so that the UK economy and
concerned citizens would take the advantages of merit goods and at the same side they will be
protected with the negative and side effects of demerit goods.
Q.3
With respect to merit goods the intervention of government are counted as moderately
addressing. This is because the government of UK is adequately enabling and providing subsides
with respect to merit goods so that its consumption will raise. Likewise, UK government also
avails adequate funds and with respect to healthcare which is counted as major merit goods. UK's
government in the form of NHS enable and entitling the best medical services and equipments
towards the hospitals so that the healthcare situation and problem will be resolved. NHS being a
major organization in association with government enabling and availing the best healthcare
facility toward the economy of UK. However, it is also to be noted that as the government is
raising its funds towards the healthcare and other facilities but it has increased the negligence
and carelessness among people because now the people are free that government is taking care of
their health, so they are not adopting and taking adequate steps.
Along with rising tuition fee every year, England is counted as such city where the
education is very expensive. However, it is seen that British students can study in any University
of EU and EEA country with the fulfilment of required entry regulation. Likewise, it is also a
system that if the student of home country are taking free education then the students of UK are
also not entitled to pay fee (Where can UK students study for free?, 2018). Thus, around 10EU
countries do not make any charge with undergraduate student fee. Prior to 1998, England
education system is fully funded by government and beneficiaries get the free education but with
the rising of prices and changing trends, privatization take place and school fees and concept of
free education also starts declining.
In the same way it is also analysed that the health spending and UK's healthcare system is
spending less and around half amount is being spent over healthcare while comparing it with

other countries (Reality Check: Does UK spend half as much on health as US?, 2018). It is also
analysed that the spending of NHS in comparison of US health system is half in case of
healthcare. This means that the government intervention in case of healthcare services and sector
of the UK is declining and reducing in case of UK.
Thus, from the above analysis and findings it would not be wrong to said that the
government intervention towards the merit goods was moderate and it was not too fair also
because on the one side it is raising but at the same time it is also minimizing and reducing its
investment too.
CONCLUSION
From the above report it is concluded that the goods are mainly categorised as public,
private and quasi goods based on their consumption and use. Likewise, it is also understood that
on the basis of requirement and use these goods are required within the UK's economy. It is also
found that the UK government also face certain difficulties while enabling access to public and
quasi-public goods. This report also summarizes other variant of goods including merit and
demerit goods. As per the positive impact of merit goods government has taken many
interventions in favour of merit goods but at the same time government has made many rules and
impose policies in order to restrain the use of demerit goods.

REFERENCES
Books and journals
Krugman, P. & Wells, R., 2020. Essentials of Economics, 5th ed. New York: Worth Publishers.
Pp. 285-314.
Online references
De-Merit Goods., 2021. [Online]. Available through
<https://www.tutor2u.net/economics/reference/de-merit-goods>
Demerit goods., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/Market_failures/Demerit_goods.html>
Explaining Merit Goods., 2021. [Online]. Available through
<https://www.tutor2u.net/economics/reference/merit-goods>
FERNANDO, J., 2020. Public Good. [Online]. Available through
<https://www.investopedia.com/terms/p/public-good.asp>
Government intervention., 2020. [Online]. Available through
<https://www.tutor2u.net/_legacy/assets/samples/qa-aqaecon1.pdf>
Merit goods., 2020. [Online]. Available through <https://www.learn-economics.co.uk/Merit-
goods.html>
Merit goods., 2021. [Online]. Available through
<https://www.economicsonline.co.uk/Market_failures/Merit_goods.html>
Quasi Public Goods., 2021. [Online]. Available through
<https://www.tutor2u.net/economics/reference/quasi-public-goods>
Reality Check: Does UK spend half as much on health as US?., 2018. [Online]. Available
through <https://www.bbc.com/news/uk-42950587>
Where can UK students study for free?., 2018. [Online]. Available through
<https://www.bbc.com/news/education-44041568>
1

2