Tuesday, January 22, 2013

The Economics of Supply and Demand

In economics, economists put much emphasis on supply, demand and markets. The demand part is the behavior of individuals and households; supply relates to the conducts of firms; while market is the interaction between supply and demand (Clotfelter, Ehrenberg, Getz, & Siegfried, 1991). There are dramatic resource constraints in private and public goods and despite sales being feasible, it is difficult to sell public goods even though these goods may be the primary focus of governments. Typically, governments operate as perfect monopolies. Impure public goods could be price-excludable public goods and congestible public goods.
When crowding or congestion reduces benefits to the consumer, especially when more consumers are accommodated, it is referred to as congestible public goods. This implies a congested road that decreases benefit to existing users because of traffic slowdown. When beneficial goods can be priced, they are referred to as price-excludable public goods. This could be shared private facilities such as tennis courts, dinning halls, and swimming pools that could cater for a larger part of a neighborhood.
Public Higher Education
Public higher education, as the name denotes, focus on the provision of higher education to the public. Because the government sets the tuition fees and the curriculum for instruction for public higher education, interference by private hands is minimal. Public goods become impure goods as a result of violation or abuse. Governments provide higher education to society because private institutions may not be in a position to provide the necessary education at affordable prices. While the government provides higher education without regard to class or status, private institutions may provide private education based on consumer level of financial resourcefulness. Thus, poor citizens who cannot afford to send their children to private institutions look to the government to provide education for their children and for themselves-public education that is cheaper and government administered. Whether private or public, higher educational institutions are financed by taxes collected from the public. Education has external benefits when provided at a lower level to children in society. But it can also be withheld from those who fail to pay for it. Governments with the means may provide free education to their citizens so that society can be civilized and educated and healthy human capital maintained.
Health System in the United Kingdom
The United Kingdom enjoys a system of healthcare that is distinct from that of the United States of America. This non-excludability alternative healthcare system is a public good funded by the general taxation of society by the UK government. Unlike the U.S. where insurance companies are the major providers of health care insurance, in the UK, healthcare is universal. However, people with enough income and who are financially stable and can afford advanced care may choose to seek better healthcare alternatives by visiting private medical institutions that employ advanced medical procedures.
Yellowstone National Park
The case of Yellowstone National Park fits the congestible public goods category. In this case, Yellowstone National Park is subject to crowding because of the collective consumption. According to Hyman (2011), in some cases, congestible public goods are price-excludable public goods. The park provides recreation for families and friends and tourists who travel great distances to come and enjoy the beautiful scenery and natural wonders that is exclusive to the park. Visitors are charged a small amount of fee that is instead used for park operations. Instead, the fees collected form the public is used to maintain the park and look after the welfare of the amalgamation of wildlife and exotic plant species, and the general environment. Misuse and pollution of a park visitors may lead to negative externality which, according to Hyman (2011), is the harmful effects of pollution and hazardous waste and damage done to people and property. In case visitors pollute Yellowstone National Park, the government may impose more tax on visitors to overcome the environmental disasters that come with their visitation.
Clotfelter, C.T., Ehrenberg, R.G., Getz, M., & Siegfried, J.J. (1991). Economic Challenges in Higher Education: Introduction to "Economic Challenges in Higher Education". University of Chicago Press.
Hyman, D.N. (2011). Public finance: A contemporary application of theory to policy (10th ed.). Thousand Oaks, CA: Sage Publications, Inc.

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