Chapter 14

• Merit goods: excludable, non rival

  Public goods: non-excludable, non rival

  excludable: only people who fund/aid in the costs can access them, such as public transport

  rival: if one person enjoys the good, the value of it is diminished/degraded.
• Governments provide both public and merit good t the economy in order to sustain it.
• income distribution in the market economy is exaggerated as business outcomes, such as supply and demand fail to consider social externalities. This income distribution is increased through inequality.
• Government's welfare state takes into account the inequalities in society and provides funding to counteract the income distribution, such as, aiding in higher education, transport, living standards, literacy rates, etc...
• Relative poverty: income under 30% of the average income

  Absolute poverty: when individuals just have enough funds to sustain survival.
• The governments are a valid monopolistic entity, especially for naturally monopolistic businesses in the market since they can provide goods in consideration of externalities. Businesses are a negative force to this since they focus on the profits for the firm in a market monopoly and can engage in predatory pricing.
• Governments can reduce price discrimination ABD pricing differentials for the same product. This is most likely to occur in larger firms and depends on the socioeconomic and geographical areas.
• Government reduce exclusive dealing: when a firm discourages or sets conditions for supply which restrict dealers from interacting with the firm's competitors. The Australian Competition and Consumer act 2010 prohibits this, enforces by the ACCC
• Governments reduce collusion and market sharing since it reduces the competetive force of firms to reduce the prices and inhibiting new competition from entering the market. Competition and consumer act is responsible for this reduction.
• Governments can impose both microeconomic and maroeconomic measures to ensure the business cycle is stable. SOme macroeconomic measures include fiscal and monetary policy. Some microeconomic measures include compettiton policy and trade policy.