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Economics Australia's Government And Relation To The Economy

1211 words - 5 pages

Market FailureMarket failure refers to the shortcomings or inadequacies of the market system of economic organisation in achieving allocative efficiency in all circumstances. Market failure can occur in a number of areas of economic activity such as the following:- The market fails to provide public goods which may be socially valuable but because of a lack of incentive, the private sector fails to provide them in sufficient quantity and quality- The market distributes income unequally. The distribution of market income is based on the relative marginal productiveness of the factors of production, not according to equity or fairness of the distribution among all sections of the population- ...view middle of the document...

Provision of Goods and Services, Public Goods and Merit goods- Collective goods and services include those demanded by the community as a whole such as defence, health and social security. Many of these collective goods and services may be produced by private businesses but in insufficient quantities to meet total market demand at the price offered- Public goods such as national defence and national parks are said to non excludable and non rival. i.e. no one can be excluded from their consumption and one person's consumption of the good does not reduce the amount available for someone else.- Merit goods are goods and services that the government believes are beneficial to society but they may not be produced in adequate quantities because the market is too small and there is little or no incentive. Eg, opera, libraries and theatre.Public Traded EnterprisesThe Public Trading Enterprise sector is an important provider of economic infrastructure and contributes revenue to general government in the form of dividends from its operations. The PTE privatisations in the 1990's have occurred in two main sectors: electricity and gas and transport and communications.Stabilisation of the EconomyMacroeconomic stabilisation policy refers to the use of government fiscal and monetary policies to achieve the goals of full employment, price stability and economic growth in the economy. The government can use its policy mix to counter the effects of severe fluctuation in the business cycle. The government could use fiscal policy by budgeting for a surplus (i.e. GCompetition and Environmental Policies- The Australian government uses competition policy set out in the Trade Practices Act 1974 and enforced by the Australian Competition and Consumer Commission (ACCC) to achieve effective competition in Australian Markets. The Trade Practices Act 1974 deals with consumer protection, anti-competitive conduct, access to essential facilities and merges and takeovers likely to lessen competition.- The Australian and state governments attempt to control environmental externalities through a variety of measures such as taxing polluters, by issuing licenses, quotas or permits to pollute or use environmental resources and imposing fines for contravening clean air and water legislation.Reallocation of ResourcesChanges in the level and composition of government taxation and expenditure can affect resource allocation in the following ways:- Expenditure on collective goods and services and welfare by taxation will shift some resources out of private...

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