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Tutorial 4 Public Goods, Public Choice and Government Failures
Tutorial 4 Public Goods, Public Choice and Government Failures
Tutorial 4 Public Goods, Public Choice and Government Failures
a) Ice cream,
b) Airport security system
c) Courts and tribunal system
d) Sanitisation & disinfection services; and
e) Recreational park
needs of buyers.
What are
private goods
services that are provided by the
and public
members of society.
goods ?
Market system /
Private Goods:
- Rivalry Produced by the market
1. Ice cream
system
- Excludability
Public Goods:
- Nonrivalry
2. Airport security
- Non-excludability Provided by government
system
Public Goods:
- Nonrivalry
3. Courts and
Provided by government
tribunal system - Non-excludability
Private Goods:
4. Sanitization and
- Rivalry Provided by the market
disinfection
system
services
- Excludability
Market system /
Public Goods:
- Nonrivalry:
5. Recreational Provided by
Park - Non-excludability government
Public Good
A commodity or service that is made
available to all members of a society
Elaborate on this
Characteristics of The Public Good
issue from a
All residents of the condominium, both those who pay
1. Non-rivalry
and those who do not pay the maintenance fee, can use the
public good public facilities as they are non-excludable.
perspective 2. Nonexcludability
All residents of the condominium, both those who pay
and those who do not pay the maintenance fee, can use
the public facilities as they are non-excludable.
Elaborate on this issue from a
towards it.
Resources, goods and services may be overprovided.
The other residents will not pay the maintenance costs.
The low or even zero demand causes management impossible to
5. Enter the defaulter’s unit without permission and confiscate their things
Management corporation can confiscate any of the defaulter's movable
property located inside or outside his flat.
QUESTION 3
(RM Millions) (RM Millions) (RM Millions) (RM Millions)
No hotel 0 - 0 -
A: 10-story hotel 140 140 160 160
B: 15-story hotel
320
180
460
300
Project
Net Benefit
ANSWER:
(RM Millions) Yes, the developer should build a hotel and the hotel that
will provide the optimal allocation of resources is the 15-
No hotel 0 story hotel.
A: 10-story hotel 20
B: 15-story hotel
140
C: 20-story hotel 80
and the total cost is RM320 Millions.
D: 25-story hotel -60
principle of representation that stipulates that a citizen's vote should not be valued higher
Hospital 1 - 1 2
Inefficient voting outcomes
rejection of a public good
School - 1 - 1
acceptance of a public good
2. Quadratic voting system
1 person can cast more than 1 vote and Dom Adam Johny
s votes
they have to purchase their vote.
Cost of voters = (number of votes)^2 Hospital 2 3 1 6
School 1 1 5 7
Total cost
9 16 36 61/13
(RM)
QUESTION 5
Malaysia Competition Commission fined MAS and AirAsia RM10 million each in 2014
after finding that both airlines had breached the market sharing prohibition under Section
4 (2) of the Competition Act by agreeing on sharing markets in the air transport services
sector within Malaysia. Both airlines then appealed over the fine, and on Feb 18, 2016,
Competition Appeal Tribunal (CAT) set asideMyCC's decision.
[Source: News Straits Times (https://bit.ly/2ZItg7w)]
Related to the concept of Government Failure in economics, discuss the news excerpt
above.
Happens
when there is insufficient allocation of
resources due to the government
intervention
Government
Failure Causes
regulations
Regulatory
CAT as the regulator should have
stopped MAS & Airasia's deal after the
Capture
Competition Act came into force
CAT acted in the interest of the
producers while the consumers are left
with no choice
CAT also declared there were loopholes
in MyCC's accusations and proceeded
to defend AirAsia and MAS
MyCC might've not thoroughly
investigated.
AirAsia and MAS made an agreement
into force
Lack of
information Consequence
Loss of economic welfare
Have to pay RM30,000 as a
reparation cost
REFERENCES
1. Ingham, S. (2022). public good | economics | Britannica. In Encyclopædia Britannica.
https://www.britannica.com/topic/public-good-economics
2. Brue, S. L., Masaki, S., & McConnell, C. R. (2017). Economics. McGraw-Hill Education.
3. The Audiopedia. (2018, September 10). What is QUADRATIC VOTING? What does QUADRATIC VOTING
mean? QUADRATIC VOTING meaning. YouTube. https://www.youtube.com/watch?v=spox0h4O7qU
4. Team, T. I. (2021, December 7). What is the free-rider problem? Investopedia.
https://www.investopedia.com/terms/f/free_rider_problem
5. Ho,L.y (2021a,January 12). AirAsia, MAS did not breach anti-competition rules, the court told. ree Malaysia
Today.
http://www.freemalaysiatoday.com/category/nation/2021/01/12/airasia-mas-did-not-breach-anti-competition-rules-
court-told/
Thank You!
Do you have any questions for me before we go?