Graded Assignment
Grade 11HL3
Explain how the public goods problem has made it necessary for broadcast media like free to air television and radio to support themselves through advertising. Evaluate what other solutions to this problem has been used in the country allocated to you.
[Some suggestions: You suppose to explain public goods, their characteristics, definitions, cost considerations , positive externality. In second part search the country allocated to you and analyse how public goods are provided, evaluate the various ways they are using to finance the public goods.
You will be awarded for using appropriate key terms, citations/ references, honesty, appropriate examples.
Word Count: 300 words minimum
Due date for submission: Sunday, January 18th 2015. Time 11.59PM
7 comments:
A public good is a good that is provided to the public by a nation’s government or public sector as private firms they would not be beneficial to provide. Some examples of these are goods such as roads, national defence and streetlights.
Public goods are usually priced lower than what they would had they been provided by the private sector. This means that there are no wealth barriers that restricts any of the population from utilizing this good. One major reason for this is that the aim of providing these goods is not profit maximization, instead the goal for these public firms is community welfare. Another advantage that public goods hold over normal ones are that they are usually positive externalities, as the people benefiting from these goods are not the ones that were involved in the production of it.
However, public goods also have disadvantages compared to normal goods. For instance, public goods would not be produced with the same quality had they been produced by the private sector, and this is usually due to a comparatively lack of capital and specialization for the producing firm. Another disadvantage is that the lack of competition of producing firms would mean that the producers would not feel the need to improve the product.
China, a country ruled by the communist party, relies heavily on public goods as it is a planned economy, meaning that the public sector accounts for most of the countries production. In the twentieth century, public goods played a major part in the economy as it usually does in communist countries. However, over the years as the number and influence of the communist party have increased on the economy, the amount of public goods have reduced drastically, which has affected the economy in a negative manner.
China received most of its finance for public goods from taxation, and as the government has reduced its influence in the economy, the lack of finance is one of the major reasons for the decrease in public goods produced in the country.
Public goods are goods that are available to the public. They are non-excludable and non rivalrous. That means that no one can be discriminated from using it by putting a price for example and also if one buys a good, an equal amount of it should be available to another. Such goods lead to a positive externality as the costs for society are none but the benefits are greater. Also the marginal social cost is equal to the marginal private benefit. In the case of public goods, the public benefits from the provision of public goods. Example- Roads, bridges, malls, etc. anyone can use these and not be excluded and they all benefit.
These leads to a problem called the free rider problem. Consumers take advantage of public goods since they get the benefits of the good at no cost and hence utilise it. For example streetlights benefit everyone, but no one pays for it. This is why it is only provided by the government. Private companies aim to make profits. If they provided public goods, they would not make profits and would just end up paying the costs. Since people would not pay for the goods, the company would not even cover their investment and would end up in a loss. This is why private companies to not produce such goods.
Free air media like broadcasting television and radio do not receive any money through the public. They just have their own costs and for them to continue running, they cover costs through advertisements.
The free air channels and radio would come into a loss and hence Switzerland has imposed a law for the citizens to pay a television license fee by which all the citizens using television and radio have to pay a fee to fund public radio and television. According to the Swiss Federal Law on Radio and Television (RTVG), the reception of radio or television programs from SRG SSR must be registered and is subject to reception fees. The fees are paid per household or business location and not per device. The licence fee in Switzerland is CHF 462.40 (€385.00) per year for TV and radio.
This is how the government of Switzerland helps the public radio and television channels to survive and to deal with the free-rider problem.
Reference- http://en.wikipedia.org/wiki/Television_licence
sir i made a new post to answer the question
Divy Dangi
Country: USA
Sir I created a new post where I posted the answer for the question.
Public Goods in Australia - Roads.
A public good is a good that made available for the public. It is both non-excludable and non-rivalrous in terms that individuals cannot be effectively excluded from use of the good and the use by one individual does not reduce availability to others. For example If an entrepreneur stages a fireworks show, people can watch the show from their windows or backyards. Because the entrepreneur cannot charge a fee for consumption, the fireworks show may go underproduced, even if demand for the show is strong. This creates the “Free- rider problem” Even if the fireworks show is worth a dollar to each person, very few people will pay a dollar to the entrepreneur. The others will try seek to “free ride” by allowing others to pay for the show, and then watch for free from his or her backyard. If the free-rider problem cannot be solved, valuable goods and services—ones people otherwise would be willing to pay for—will remain underproduced. If left to the free market mechanism, no public goods would be provided and, as a result, there would be a clear market failure.
Externalities occur when one person's actions affect another person's well-being and the relevant costs and benefits are not reflected in market prices. A positive externality arises when for example your neighbours benefits from you cleaning up your yard. If you cannot charge them for these benefits, you will not clean the yard as often as they would like. A negative externality arises when one person's actions harm another. When polluting, factory owners may not consider the costs that pollution imposes on others. Policy debates usually focus on free-rider and externalities problems, which are considered more serious problems than non-rivalrous consumption.
The pricing of public goods has been a difficult proposition for the Australian government over the years, due mostly to the interpretation of the non-excludable and the non-rival characteristics of public goods.
Roads are an example of something that has been assumed to be a public good based on these two characteristics. However some roads exhibit ‘excludable’ characteristics such as congestion or vehicle restrictions.
In Australia, funding of roads have been primarily based on, but not limited to, a Pay-As-You-Go (PAYGO) system where the cost of road service provision is estimated from the average of expenditure on roads from the three most recent budgets and prices charged to heavy vehicles (used in freight transportation) are determined from these costs. The aim of pricing is to limit demand so that suppliers do not over- or under-supply their goods. For roads, pricing relates to the valuation of the road by road users. Since they have typically been considered as a public good though, roads have often been considered as an undervalued good. ‘Exclusive’ roads have already been utilised, albeit on a relatively small scale. These would include toll roads whereby users must pay an access fee. The economics behind this thinking is to do with the valuation of the toll road by individual users – that is, the cost-benefit analysis between time, monetary and additional utility gains (or losses). Moreover the use of special transit lanes such as high occupancy, bus and cycle lanes (monitored by cameras at times) is another example of ‘exclusive’ roads.
http://www.econlib.org/library/Enc/PublicGoods.html
http://www.infrastructureaustralia.gov.au/publications/files/Public_Good_Pricing_Roads_and_Technology.pdf
Sir, I have written my answer in a new post.
well done students
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