“ Economics Revision

Presented by
Thabani Moyo

”
 Public Sector
• The composition and necessity of the public sector

• Problems of public sector provision

• Objectives of the public sector

• Budgets

• Fiscal policy (Including Laffer curve)

• Public sector failure

 Public Sector
Definition

• Portion of the economy composed of all levels of governm

ent and government-controlled enterprises

• any part of a state or national economy that is tied to publi

c programs or services and is controlled by the governme
nt.
 The composition & the necessity

Levels of Government

General Government Consist of:

• Central Government
• Provincial Government
• Local Government
 Composition
Central Level

Manage and govern the country

Head is the President
Make strategic decisions
 Composition
Provincial Level

• Manage and administer the Province

• Nine Provinces
• Head is the Premier
 Composition
Local Level

• Responsible for service delivery in the community

• Head is Mayor
 Composition
Public Corporations (State owned enterprises) Parastat
als

• Eskom
• Transnet
• Denel
 Neccessity
To supply public goods

• Goods are mostly in the form of services

• Government use policies such as taxation and governme
nt spending to supply it

Public goods and services consist of:

 Public Goods
Collective goods e.g. Parks, Beaches

• Free Riders or people who do not want to pay can be excl

uded by levying fees.

• Can be excluded
 Public Goods
Merit goods e.g. Health, Education
• Merit goods benefit people more than private goods

• If the public sector does not provide it, then there will be a
undersupply.

• It generates little income that is why the private sector is n

ot keen in providing it.
 Public Goods
Community Goods E.g.: Defence, Police, Street lightning

• It is characterised by Non Excludability

• Everyone can use it irrespective if they are prepared to pa
y a price for it or not

• It is characterised by Non rivalry

• The use by one does not exclude the use by another pers
on.
THE MULTIPLIER IN A TWO SECTOR MODEL
Non-Merit goods e.g. Cigarettes

• It is harmful to society

• Government impose taxes and regulations to discourage

consumption
 Necessity
To conserve resources
• The environment consists of resources that no one owns
but everyone can use it free of charge.
• E.g. Oceans for fishing, Air that we breathe, the natural sc
enery
• Governments must intervene to protect the environment
• Governments must intervene in the economy by making L
aws and setting up legal structures to protect the econom
y.
“ THANK YOU