Chương 4 Chính phủ trong nền kinh tế hỗn hợp ppt

Chapter 4
Government in the mixed economy
David Begg, Stanley Fischer and Rudiger Dornbusch, Economics,
6th Edition, McGraw-Hill, 2000
Power Point presentation by Peter Smith
4.2
What do governments do?
■
create laws, rules and regulations
■
buy and sell goods and services
■
make transfer payments
■
impose taxes
■
try to stabilize the economy
■
affect the allocation of resources
4.3
Government spending
0
10
20
30
40
50
60
% of national income
1880 1929 1960 2000
The scale of government activity has grown steadily in

industrial countries since 1880
Japan
USA
Germany
UK
France
Sweden
4.4
What should governments do?
■
Governments may be justified in
intervening in the economy in the
presence of market failure
■
Six ways in which intervention may
improve the allocation of resources:
4.5
What should governments do?
■
(1) The business cycle
–
decisions on taxation and spending may affect the
business cycle
–
not always favourably
■
(2) Public goods
–
goods that, even if consumed by one person, are
still available for consumption by others – e.g.

clean air
–
the free-rider problem prevents the market from
achieving production of the “right” amount of such
goods.
4.6
What should governments do?
■
(3) Externalities
–
costs and benefits of production are not
always reflected in market prices
➡
e.g. pollution, congestion.
■
(4) Information-related problems
–
private markets may not produce the
“right” kinds and amounts of information
➡
e.g. food labelling, health and safety
regulations.
4.7
What should governments do?
■
(5) Monopoly and market power
–
resource allocation may be improved by
limiting or regulating the market power of
monopoly firms

■
(6) Income redistribution and merit goods
–
concern with equity issues
➡
e.g. protecting vulnerable groups
–
merit goods are goods that society thinks people
should consume regardless of income
➡
e.g. health, education
4.8
Who pays a commodity tax?
D
S
S
Q
0
P
0
Quantity
Price
With no tax, market
equilibrium is at P
0
, Q
0
S'
S'
Q

1
P
1
With the tax, supply is S'S'
and equilibrium is P
1
Q
1
…but who pays the tax?
4.9
C
Area C is a
welfare loss.
B
Area B is borne
by producers
A
Area A is borne
by consumers
Who pays a commodity tax?
D
S
S
S'
Q
1
Q
0
P
0

P
1
S'
The incidence of the
tax depends upon the
elasticities of demand
and supply.