Topics: Africa, Externality, Market failure Pages: 4 (1288 words) Published: March 21, 2013
c)Is there evidence for market failures or government failures in the provision of public services, merit goods and control of demerit goods in Sub-Saharan Africa? Discuss (30 marks) Market failure is a circumstance in which private markets do not bring about the allocation of resources that best satisfies society’s wants. Government failures are inefficiencies of the public sector. Public goods are goods that would not be provided in the free market system, because firms would not be adequately charge for them. Merit goods are goods that are deemed as necessary for consumption by the state and if left to the private sector only, such goods would be under-consumed .Demerit goods are goods and services whose consumption is considered unhealthy, degrading or otherwise socially undesirable due to the perceived negative effects on the consumers. Such goods are deemed as unnecessary for consumption by the state. Most of the countries in the Sub-Saharan Africa like Zimbabwe, Zambia and South Africa are operating under a mixed economy. A free-market on its own can’t best allocate resources in a best way that satisfies the society. Market failures would arise as the invisible hand on its own can’t provide adequately for the society. S

Costs and benefits
External benefit
Welfare loss because merit goods tend to be under consumed by the free market b
Merit goods provide externalities but if left wholly to the private sector, it is likely that merit goods will be under consumed. In most Sub-Saharan African countries such as Zimbabwe, Namibia and Zambia, the private sector provides education at high costs which results in the under-consumption of the good. Most Governments often provide merit goods for free but when considering Sub-Saharan African countries, this has not been in practice, for instance, public schools in Burkina Faso have since been experiencing high charges of fees. This often results in welfare loss as illustrated...
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