MOD3327 Economics for Business

Introduction

The report discusses  the difference between private goods, public goods, quasi-public goods, merit goods and demerit goods. The report is divided into two parts based on Task 1 and Task 2. The first part deals with the importance of private goods, public goods and the quasi-public goods with proper examples of failure of the government of the United Kingdom to allocate the goods among the citizens. The section would also tell us whether the government of the country has any difficulty in providing the public and the quasi-public good with proper reference to the social welfare programmes. The second part of the report deals with the provision of merit and demerit goods by the market of United Kingdom. It would also aim to understand on how the government is forbidding the use of demerit goods. The second part of the report also discusses whether the government interventions of the United Kingdom properly address the provision of merit goods with reference to proper examples from the last three years. Private goods, public goods, quasi-public goods, merit goods and demerit goods are important point of discussion in the field of economics. United Kingdom is among the topmost countries of the world in terms of Gross Domestic Product and other indicators (bbc.com 2020). Hence, it is important to understand whether the country can allocate these goods efficiently with the help of welfare programmes.

Task 1

Part 1

Public Goods

Public Goods are those services and commodities that are readily available to all the citizens of a society (investopedia.com 2021). Generally, such commodities and services are provided by the government and paid through the mode of taxation. Some common examples of public goods are rule of law, national defense and enforcement of law. Some basic commodities such as clean air and drinking water are also regarded as public good. These commodities are non-excludable and non-rivalrous (Krugman, Wells and Graddy 2020).

Private Goods

Private Goods are those services and commodities which if consumed by one person reduce the chance of consumption by other individuals. These goods are excludable and rivalrous. Some examples of private goods are toilet paper, food items, flight rides, dining at restaurant, mobile phones and so on (investopedia.com 2021).

Quasi-public goods

Quasi-public goods are those commodities or services that can be considered to be close to public goods. During the rise in the demand, these commodities become rival. Some example of quasi-public goods are crowded beach, toll bridge, roads, tunnel and so on (tutor2u.net 2021).

Why U.K requires public goods?

The United Kingdom requires public goods because they are structured in such a way that they are easily accessible to the public and acquires some characteristics that forbids some group of people unable to access the commodities. The United Kingdom provides taxpayer-funded healthcare services to the citizens. The Budget, 2021 of the United Kingdom provides a list of public sector spending on different sectors. Figure 1 shows the public sector spending in the country.

Figure 1: Public Spending of 2021-2022 (assets.publishing.service.gov.uk 2021)

From Figure 1, it can be seen that maximum spending has been done on social protection of around £302 billion. The second biggest public sector spending is on healthcare of about £230 billion. Other public goods provided are education, transport, public order, defence, agriculture, industry, employment and so on.

Why U.K. requires private goods?

The United Kingdom requires private goods because through the provision of private goods the private companies and organisations can gain profits by meeting the needs of the citizens. This can increase the Gross Domestic Product of the country. During the pandemic of Covid-19, the one of the biggest share of private good provided by the United Kingdom was toilet paper. According to the recent data from Statista, in the year 2020, the average weekly spending on toilet paper in the U.K by all household was around 1 British Pound.

Why U.K requires quasi-public good?

United Kingdom requires quasi-public goods to avoid the free rider problem that arises due to the provision of public good. Toll bridges are used to avoid the congestion on roads. A good example of quasi-public good provided by the United Kingdom is airwaves that are utilised by radio stations, television and mobile phones. The government of the United Kingdom control the issuance of licenses to operate cell phone service with the help of airwaves.

When U.K markets fail to provide private goods?

In the year 2020, when the economy of the United Kingdom was hit by the Covid-19 pandemic, there was a panic-buying in the country. Many people started to stockpile food items, toilet paper and other commodities. During this time, the markets of the country could not efficiently meet the high demands of individuals (Partridge and Butler 2020).

How the government should provide public good and quasi-public good?

The government of the United Kingdom should provide public good with the help of the tax revenue collected from the citizens of the country. The allocation of public good generates the problem of free rider where individuals enjoy the services from the government without actually paying anything (tutor2u.net 2021). The government should provide quasi-public goods with the cooperation of private companies or organisations. This would reduce the problem of free-rider that arises in case of public goods.

Part 2

Examples when UK government has difficulty in providing public and quasi-public good

One of the major public good provided by the United Kingdom is public health. In this regard, the National Health Service became functional of July, 5, 1948. In the year 2020 during the Covid-19 pandemic, the NHS faced some challenges to provide healthcare facilities to citizens. When the government of the United Kingdom founded NHS, turned out to be a turning point in the country. During the pandemic, there was a creation of crisis of the hospital backlog. Many scheduled and routine-care operations were stopped to free up the resources so that many patients could be admitted in the ward of Covid-19 disease. Covid-19 pandemic has put the workers of healthcare under pressure. Hence, the government are having difficulty in providing healthcare as public good during the years of 2020 and 2021 (gov.uk 2021).

One of the quasi-public good that has become very common in the recent years is the vaccination for the prevention for Covid-19. The vaccination doses are in high demand in the country. The famous vaccine of Covid-19 till now are Covishield, Covaxin and Sputnik V. However, the government is facing the problem to provide the vaccine in an efficient manner because of the lack in the production of the vaccine.

Explanation to whether the public spending and social welfare programmes result in the provision of public and quasi-public good

Evidence shows that social welfare programmes and government expenditures are efficient in the provision of public and quasi-public good. During the Covid-19 pandemic, different social welfare programmes were arranged by the government to provide proper healthcare and vaccination drives to the people of the country. The government of the the United Kingdom spent almost £269 billion on the healthcare of citizens during the time of Covid-19 pandemic. According to ONS data, the rise in spending in healthcare was around 25%. Moreover, at the onset of the pandemic, the government of U.K. implemented the emergency changes to Social Security System. These evidences prove that public spending and social welfare programs were efficient in the provision of public good and quasi-public good.

Relevant examples of UK public, quasi-public and private goods

In a recent news article, it was said that the Storm Christoph has caused huge flooding in the country of Wales and England of the United Kingdom and 2000 homes have been evacuated. In this case the government has provided public service of flood management. The Environment Agency use set of temporary barriers of flood to support the protection in the areas that are flood prone (bbc.com 2021).

The vaccination for Covid-19 is an example of quasi-public good. According to a new article, more than 43 million citizens in the United Kingdom has received the first dose of the Covid-19 vaccination. This is the biggest inoculation programme that has been ever launched in the United Kingdom (bbc.com 2021).

Private school is an example of private good. In this regard, the education sector was closed due to the pandemic. According to a recent news article, Simon Hart the secretary of Wels discussed that a policy of UK would be required to reopen the schools that were closed due to the lockdown (bbc.com 2021).

Task 2

Part 1

Merit goods in the U.K. market

Merit goods are those commodities and services that the government feel that the citizens might under consume. Hence, there is a need to subsidize those services and commodities or being provided free of cost such that the consumption of the goods does not totally depend on the capabilities of the people to pay for them (tutor2u.net 2021). The examples of merit goods are housing, education, fire protection, public parks, refuse collection and so on. Education is a type of merit good that might be under consumed in the United Kingdom. Hence, the government and UK market would want to subsidize the education system so that the facilities reach all people of the country.

Demerit goods in the U.K market

Demerit good are those service or commodities that are considered to be unhealthy for production and consumption. The examples of demerit goods are alcoholic beverages, tobacco, fast food and so on (tutor2u.net 2021). The government of the United Kingdom tries to discourage the consumption of fast food because it is the source of health problems and would increase the spending of government on the National Health Services.

Impact of merit and demerit goods on the society

Education is a type of merit good subsidised by the government and the market of United Kingdom. It creates a positive externality (tutor2u.net 2021) by providing knowledge to all citizens that would lead to creation of employment in the country in the future. This would make the country technologically more advanced. On the other hand, demerit good such as fast food would cause negative externality on the society. Fast food causes health problems. This raises the cost of government to spend on health services.

Part 2

Policies to improve access to merit good and discourage demerit good

Education is a type of merit good. In this respect, the government of the United Kingdom has implemented the Education Policy. The main focus of the government under this policy was on the primary education and the lower secondary education. The objective of the education policy is to ensure numeracy and literacy among the children. Education can change the lives of people by providing better modes of employment, enhanced health choices and active citizenship. It can transform the anticipation of the marginalised and poor children by creating more accomplished society (gov.uk 2021).

On the other hand, demerit goods such as alcoholic drinks, tobacco, fast foods are dangerous for the health of individuals and the society as a whole. In this regard the government of the United Kingdom has planned to ban all the adverts of junk food from online platforms. The ban on the adverts of fast food would create an impact on the consumption of fast foods that are rich in salt, sugar and fat (Sweney 2020). The government of United Kingdom wants to discourage the consumption of such foods to reduce the health problems, especially obesity. This would also reduce the extra spending done in the National Health Services. The government of the United Kingdom has also implemented interventions to discourage alcohol consumption in the country. The “lower-risk guidelines” of England claims that men should not generally consume more than three to four units every day. Moreover, women should not consume more than two to three units each day. Many citizens of the country drink with within a certain limit. However, binge consumption of alcohol contributes to half of the aggregate consumption of alcohol each day (gov.uk 2021).

Part 3

Explanation whether interventions of UK government addresses provision of merit goods

During the Covid-19 pandemic, the education sector of the United Kingdom was widely hampered (ons.gov.uk 2020). The education of children can be considered as merit good because it might be under consumed by the citizens and the government and the market can subsidise the education sector so that the facilities can reach most of the people of the country. The government of the United Kingdom realises that it is high time to focus on the education of children once again after facing the challenges of Covid-19 pandemic (bbc.com 2021). The government is ready to look into a bigger picture and provide an international start in the lives of children. Improving the results for the children of U.K is one of the major priorities of the government as the country recovers from the Covid-19 pandemic. The authorities believe that most of the state schools did not provide proper teachings and opportunities that were available to the higher class of the society. Thus, it can be said that education is under consumed. The government of the country has started to change the education reforms placed in 2010. The country’s leading trusts of academy and the free schools delivers uncompetitive level of education in respect of both quality of teaching and the curriculum. The aim of the authorities is to make the state owned schools so efficient that opting for private schools would be an unconventional choice for the parents (gov.uk 2021). From the above evidences, I can say that the interventions of the United Kingdom effectively address the fair allocation of merit goods. Merit goods create positive externalities in the society. However, there is a possibility of under consumption of the services and goods. Thus, government must subsidise or provide the facilities free of cost. From the example above, I can understand that government of the United Kingdom tries to provide better education facilities after the recovery of the country from C ovid-19 pandemic. The country tries to make a better provision of education in the state owned schools such that admissions to private school turns unconventional in the country.

Conclusion

The report concludes that social protection and health are the major public goods on which the government has included their expenditures. The most important private good in the United Kingdom provided during the outbreak of the Covid-19 pandemic was toilet paper. The quasi-public good relevant during the time of the outbreak of Covid-19 pandemic in the year 2020 and 2021 is the vaccination drive to control the outbreak of pandemic. The merit good that was provided by the government of United Kingdom and the private market was education and the demerit goods that were prohibited were alcohol and fast food.

References

assets.publishing.service.gov.uk 2021. BUDGET 2021. [online] Assets.publishing.service.gov.uk. Available at: <https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966869/Budget_2021_Print.pdf>

bbc.com 2020. United Kingdom country profile. [online] BBC News. Available at: <https://www.bbc.com/news/world-europe-18023389>

bbc.com 2021. Covid vaccine: How many people in the UK have been vaccinated so far?. [online] BBC News. Available at: <https://www.bbc.com/news/health-55274833>

bbc.com 2021. Department for Education had no Covid plan, say MPs. [online] BBC News. Available at: <https://www.bbc.com/news/education-57241471>

bbc.com 2021. What's the best way to prevent flooding?. [online] BBC News. Available at: <https://www.bbc.com/news/uk-25929644>

gov.uk 2021. 2010 to 2015 government policy: harmful drinking. [online] GOV.UK. Available at: <https://www.gov.uk/government/publications/2010-to-2015-government-policy-harmful-drinking/2010-to-2015-government-policy-harmful-drinking#:~:text=UK%20policies%20list.-,Issue,most%20days%20or%20every%20day.>

gov.uk 2021. Department of Health and Social Care. [online] GOV.UK. Available at: <https://www.gov.uk/government/organisations/department-of-health-and-social-care>

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