Practise explaining why governments provide public goods when private markets underprovide them because of the free-rider problem.
Between 2017 and 2022 the Singapore Government replaced 95000 streetlights along its roads.
Explain one microeconomic reason why the Singapore Government provides streetlights.
Knowledge 1, Application 1, Analysis 2
QS9: Interpret, apply and analyse information in written, graphical, tabular and numerical forms.
Knowledge
1 mark for definition of market failure or public goods e.g.:
- inefficient allocation of ressources Or
non-excludable and non-rival (1)
Application
1 mark for applying to the stem, e.g.:
- Streetlights are a public good/
- 95000 streetlights replaced/
- 19000 streetlights replaced on average each year (1)
Analysis
Up to 2 marks for explaining one reason e.g.:
- Private sector firms are unable to profit from supplying public goods (1) as consumers will free ride them without paying / it is impossible to exclude people (1)
- When one person consumes the good it does not limit the consumption by others (1) so that it is difficult for private sector firms to charge people to use the good (1)
- The price mechanism leads to the private sector not allocating enough resources to public goods (1) so the government steps in to correct the market failure (1)
- Governments provide them as they ensure safety (1) and private sector firms not providing them could mean it is unsafe (1)
(4)