Source of Government

Failure
Dennis A. Dolom
Jr.

Government
Failure
This occurs when government intervention
in the economy causes an inefficient
allocation of resources and a decline in
economic welfare.

Politicians
Politicians - a person who is professionally
involved in politics, especially as a holder of or a
candidate for an elected office.
- Politicians may have poor information about
the type of service to provide.
- Politicians may not be experts in their department,
but concentrate on their political ideology.

Voters
Voters - people , citizen of a nation,
whocan
ordoesvote. One who has the right to vote.
- Rational Ignorance
- Rational Abstention

Interest Groups
Interest Groups - an organization of
people who share a common interest and
work together to protect and promote that
interest by influencing the government.

Bureaucracies
Bureaucracies - administratively
organizing large numbers of people who
need to work together.
- Their pursuit of utility can and does
conflict with the efficient implementation
of government policies.

Market Failure
Dennis A. Dolom
Jr.

Market Failure

Market Failure is the inability of a

market to achieve an efficient outcome.

Markets failure occurs when markets do

not efficiently allocate resources in a
manner that achieves the greatest
possible level of satisfaction.

Public Good

A Public Good is nonrival and nonexcludable.

A good is noexcludable if it is not
possible to prevent others from
consuming it.
A good is nonrival if one persons
consumption of the good does not makes
it impossible for others to consume it.

Market Control
Market Control is an attempt to achieve
specified economic or political goals through
the deliberate manipulation of factors such
as supply, demand, pricing, transportation,
or taxation.
Market control arises when buyers or
sellers are able to exert influence over the
price of a good and/ or the quantity
exchange.

Externalities
Externalities are the effects of a decision
on a third party that are not taken into
account by the decision-maker.
Negative externalities occur when the
effects are detrimental to others
Positive externalities occur when the
effects are beneficial to others

Imperfection Information

The lack of information among buyers or

sellers often means that the market price
does not fully reflect all benefits and costs
of producing, consuming, and exchanging of
good.

Government Expenditures
Dennis A. Dolom
Jr.

Government Expenditures
Spending by the government sector
including both the purchase of final goods
and services, or gross domestic product,
and transfer payments.
Government expenditures are used by
the government sector to undertake key
functions, such as national defense and
education.

Purchases

The government sector annually

purchases about 10 to 15 percent of the
final good and services produced by the
economy , what is termed gross domestic
product.

Transfers
In economics, a transfer payment (or
government transfer or simply transfer) is a
redistribution of income in the market
system. These payments are considered to
be non-exhaustive because they do not
directly absorb resources or create output.
Transfer payments are basically gifts,
payments that made without any
expectation of production.