Q1.
Market Failure: is to do with not having enough resources to produce enough goods and services needed neither by the government nor by the society, as a result of this failure, the government develop a role to intervene in the economy in order to overcome these problems. 1. Public goods: According to the business dictionary, public good is an item whose consumption is not decided by the individual consumer but by the society as a whole; and which is financed by taxation. A public good or service may be consumed without reducing the amount available for others and cannot be withheld from those who do not pay for it. E.g. parks, police services, fire services etc.
Consumers have an incentive to not reveal their willingness and ability to pay for public goods if they believe that they will be expected or required to contribute to financing the public good accordingly by the government. After all, if the public good is supplied, it will be available to them just as it would be to anyone else because pure public goods are non-excludable. This is the essence of the “free rider problem”: the incentive which consumers have to avoid contributing to financing public goods in proportion to their valuation of such good.
Good examples to use include TV licence dodgers and people who choose to evade the Council Tax but who still receive local authority services. Another example might be a group of residents in a block of flats who all stand to benefit from the refurbishment of an adjacent playground or better lighting and security systems, but who individually might try to avoid payment and benefit once the improved amenities are in place.
Given the nature of the free rider problem, public goods are often financed through some form of enforcement, notably the compulsory nature of the TV licence fee, management fees for residents living in blocks of accommodation or