Standard SSEF5a. Explain why the government provides public goods and services, redistributes income, protects private property rights, and resolves market failures. SSEF5b. Give Examples of government regulation and deregulation and its effects on consumers and producers

Role of the Government in a Mixed-Market Economy: Provide public goods and services Redistribute income Protect private property rights Resolve market failures Maintain Competition

Examples of Public G & S

Public Goods and Services Public goods and services: provided by the government when the private market is unable or unwilling to produce the good.

2 Characteristics of a public good Shared Consumption: The consumption of the good by one person does not diminish the satisfaction by another person who consumes the exact same good. Example: Interstates Non-Exclusion: It is nearly impossible to keep a person who is unwilling to pay from enjoying the benefits of the public good. Example: National Defense

Free-riders These are people who enjoy the benefits of a good or service but contribute nothing to it nor do they incur any cost

Activity: Public or Private good?

(more than one person can use it and not diminish the value) Public or private good? Make this chart on your paper: Cannot Share Consumption (only benefits one person) Shared Consumption (more than one person can use it and not diminish the value) Can Be Excluded (you don’t benefit unless you pay) Cannot Be Excluded (you benefit even if you don’t pay)

Place the following items in the grid: College education Electric power Haircut National Defense Six Flags Mosquito treatment Cable television Canine rabies shot Street lights Panama Canal Public toll roads Police protection Health care National forest campground Potato Chip Auto airbags

Go to Flipchart:

Redistribution of income taking tax money from those who make a higher income and giving it to lower income citizens through transfer payments.

Redistribution of income Transfer Payments: a payment made to individuals by the federal government through various social benefit programs. Payments subsidize the income of recipients to allow the consumption of necessities. Examples: Welfare Social Security Food Stamps Medicaid/Medicare

Protect Private Property Private Property Rights: Laws created by governments that regulate how individuals can control, benefit from, and transfer property.  Essential in a market or mixed-market economy Businesses will not expand or invest without rights to their own property. Includes intellectual property such as: Copyrights Patents Legal documents (real estate, cars, etc.)

Market Failure – start after break Occurs when the private market is unable to produce goods or services in a way that the benefits society

Market failure A market failure can happen when (there is): Inadequate Competition (businesses have to much “market power”) Buyers and sellers are NOT well informed Resources do not move easily from one industry to another Unreasonable Prices Externalities

Correcting Market Failures Externalities – when a third party benefits or is hurt from the production or consumption of a good or service.

Externalities: Positive Externalities – when a third- party benefits from the production or consumption of a good/service. Example: your new college roommate plays their iPod full of all your favorite songs. You enjoy it even though you didn’t have to pay for it.

Externalities: Negative Externality – when a third party is harmed by the production or consumption of a good/service. Example: industries that cause air pollution during the production of a good or service.

Market Power: Maintaining competition Market power refers to a market failure resulting from the formation of monopoly or oligopoly market structures. Monopoly: One seller Oligopoly: Few sellers

Market Power: Maintaining competition The government uses regulation and deregulation to make sure industries stay competitive. Regulation-tighter restrictions and rules companies must follow Deregulation- relaxing rules and laws companies must follow

Examples Regulation Deregulation FDA-food and drug safety EPA- environmental safety FDIC- protection within the banking system 18th Amendment Banks (re-regulated in early 2000’s) Phone Companies Banks (deregulated in 1980’s) Airlines 21st Amendment Regulation Deregulation