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This insight suggests that when government provides goods or services directly, we might expect it to do so with less efficiency than private firms—except in certain cases where the government agency may compete directly with private firms. At the local level, for example, services like garbage collection can be provided by government directly, by private firms under contract to the government, or by a mix of government employees competing with private firms.

A balanced view of markets and government

The British statesman Sir Winston Churchill (1874–1965) once wrote: “No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except for all of the other forms which have been tried from time to time.” In that spirit, the theme of this discussion is certainly not that democratic government should be abandoned. A practical student of public policy needs to recognize that in some cases, like the case of well-organized special interests or pork-barrel legislation, a democratic government may seek to enact economically unwise projects or programs. In other cases, by placing a low priority on the problems of those who are not well organized or who are less likely to vote, the government may fail to act when it could do some good. In these and other cases, there is no automatic reason to believe that government will necessarily make economically sensible choices.

“The true test of a first-rate mind is the ability to hold two contradictory ideas at the same time,” wrote the American author F. Scott Fitzgerald (1896–1940). At this point in your study of microeconomics, you should be able to go one better than Fitzgerald and hold three somewhat contradictory ideas about the interrelationship between markets and government in your mind at the same time.

First, markets are extraordinarily useful and flexible institutions through which society can allocate its scarce resources. This idea was introduced with the subjects of international trade and demand and supply in other chapters and reinforced in all the subsequent discussions of how households and firms make decisions.

Second, markets may sometimes produce unwanted results. A short list of the cases in which markets produce unwanted results includes monopoly and other cases of imperfect competition, pollution, poverty and inequality of incomes, discrimination, and failure to provide insurance.

Third, while government may play a useful role in addressing the problems of markets, government action is also imperfect and may not reflect majority views. Economists readily admit that, in settings like monopoly or negative externalities, a potential role exists for government intervention. However, in the real world, it is not enough to point out that government action might be a good idea. Instead, we must have some confidence that the government is likely to identify and carry out the appropriate public policy. To make sensible judgments about economic policy, we must see the strengths and weaknesses of both markets and government. We must not idealize or demonize either unregulated markets or government actions. Instead, consider the actual strengths and weaknesses of real-world markets and real-world governments.

Questions & Answers

the meaning of elasticity
Yawe Reply
when equilibrium is égal to 1
Moussa
The tendency to change consumption habits with change in price
Iben
The type of elasticity if demand
Okonkwo Reply
aren't leaving too about bathrooms
SHADAB
I don't understand
Amina
like.
Ubong
what is money
Lawal Reply
what is supply
Lawal
the total number of goods present at a particular area at a particular time
Offset
the meaning of elasticity
Affum Reply
how to knw the break even point in business
Edmore Reply
hello
Marshal
hello
ghulam
hi
Kakay
hi
Ornill
hi
Bakari
Good evening
owi
when TOTAL COST & TOTAL REVENUE equal each other that's break even point
Bappy
How is everyone doing
Kakay
yaah
Chris
🤙🤙
Kakay
Good evening
Amarachi
how are you feeling
Sorie
hello
Marshal
hello
McClean
Hai👋👋
Noah
Hey
Andile
hello
Offset
what's up?
Offset
what are the importance of economics
sani Reply
hello
Marshal
welcome
Zaid
am new here
Kakay
hello I'm new here
Mona
your welcome
Bakari
thanks
Mona
where are you from?
Bakari
Hello I'm new here
Amarachi
what is development?
juwel Reply
it shows how many products customers are willing to purchase as the price of those product increase or decrease
Asha Reply
economics as a science
skima Reply
What is utility
Jimoh Reply
utility is a total satisfaction derives from a consumer.
Umar
what is ranking reveal choices?
Umar
wants satisfying power of a commodity is known as utility........
SHADAB
What is elasity
bohvy
Differentiate between scarcity and choice and explain how they effect perfectly elasiticity of demand and give relevant example with type of goods affected
PATRICK
Utility is ability if of available goods to satisfy human wants
PATRICK
any idea about equilibrium?
Umar
equilibrium where price and quantity demanded equals
Bappy
e
john
Equilibrium is when quantity demanded of goods and services is equal to supply to the market.
john
saaa.....
Bright
how about the profit....anybody can explain
Jeff
how about equilibrium of consumer?
Umar
bappy,john thank you the answers.
Umar
Utility Simply means the satisfaction a consumer derives from consuming a good or service
Hez
Pls can someone explain Elasticity of demand in a short terms
Osuayan
it's a degree of responsiveness to demand due to changes in prices
Ukpen
what is scarcity? pls help
Mikateko Reply
scarity is when there is a huge demand for certain goods and services but there's limited resources to actually produce those things
Mario
thank you
Kakay
what is development?
juwel
what is distribution
umar Reply
1.what is distribution? 2.what are factors affecting distribution? 3.releat what you are writing in the contest of economics and Nigeria situation
umar
what is demand
Obianyido Reply
things that are needed or wanted
Mario
The market for you In Ilorin has the following demand and supply equation Qd + 5p =9520 Qs =2.5p - 125 a) determine the equation price and quantity b) Explain the situation when the market price is below the equlibrum price
Rasheee Reply
solutions
Alex
What is scale of preference
Richmond Reply
Pls what is scale of preference
Richmond
scale of preference is a arrangement of individual wants in order of priority
Lamina
the arrangement of people want inoder of demand
Ada
This simply means the arrangement of human needs.
Oluwatobiloba
Exactly
Iben
thanks
Kayato

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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