Reference no: EM134023621

Problem

In an evaluation, assess the pressures affecting public sector budgeting designed to deliver public goods and services. Evaluate the consequences of two externalities and their impact on public sector budgeting and suggest the most practical way to study the fiscal impact of public sector budgeting.

Use bolded statements as headings in the response.

I. Analyze the practical pressures affecting public sector budgeting designed to deliver public goods and services.
II. Evaluate the consequences of two externalities and their impact on public sector budgeting.
III. Suggest the most practical way to study the fiscal impact of public sector budgeting. Get the instant assignment help.

A public good is a good or service that can be consumed simultaneously by everyone and from which no one can be excluded, even if they do not pay for it themselves. It generally is paid for by a third party such as the government (taxes). Public goods pose a free-rider problem that occurs when those who benefit from a public good (such as public roads or hospitals) or services do not pay for them or under-pay.

A private good is one for which those who do not pay for it can be excluded.

Externalities are a consequence of a governmental activity that affects other parties without this being reflected in the cost of the goods or services involved. Externalities by nature often are environmental. Some examples of negative externalities include:

a) Air pollution
b) Water pollution
c) Farm animal production
d) Passive smoking
e) Traffic congestion
f) Noise pollution

Market failure is an inefficient allocation of resources. Government failure occurs when government intervention results in a more inefficient and wasteful allocation of resources.

Budgetarily, governments can intervene (i) through taxes and (ii) through subsidies.