INTRODUCTION%20TO%20PUBLIC%20SECTOR%20

1
INTRODUCTION TO PUBLIC SECTOR ECONOMICS

• POLS 4358

2
TOPICS

• WHAT ARE THE KEY ISSUES ECONOMICS IS CONCERNED
  WITH?
• ECONOMIC ANALYSIS THE PUBLIC SECTOR
• HOW ECONOMISTS PERCEIVED THE WORLD THE CIRCULAR
  MODEL

3
WHAT ARE THE KEY ISSUES ECONOMICS IS CONCERNED
WITH?

• Scarcity management
• limitless demands and limited resources
• Every society faces three key questions
• What is to be produced?
• TASTE PREFERENCE
• How is it to be produced?
• EFFICIENCY
• Who gets what?
• EQUITY

4
WHAT ARE THE KEY ISSUES ECONOMICS IS CONCERNED
WITH?

• Every decision, made either by an individual or
  society, concerning the previous three questions
  necessarily implies an opportunity cost
• An opportunity cost is essentially what you give
  up of X in order to obtain Y
• Time
• Forgone income
• Resources

5
ECONOMIC ANALYSIS THE PUBLIC SECTOR

• Every society must decide how to address the
  above three questions and make choices. What are
  the choices?
• Market driven vs. state allocative policy
• Recently there exists a debate concerning whether
  the private sector can deliver more efficiently
  services that traditionally are governmental
  functions such as education, trash collection,
  roads, mail delivery, etc.

6
ECONOMIC ANALYSIS THE PUBLIC SECTOR

• The objective of this class, therefore, is to be
  able to evaluate pros and cons of choices of
  market (prices) versus state driven allocative
  mechanisms (taxes fees).
• The analysis employed will be positive (cause
  effect) rather than normative (value judgment)
  driven.
• Microeconomics provides the theoretical tools to
  analyze the framework of choices.

7
HOW ECONOMIST PERCEIVED THE WORLD THE CIRCULAR
MODEL
HOUSEHOLDS
FACTOR MARKET
GOODS MARKET
PUBLIC SECTOR
BUSINESSES
8
THE FLOW OF MONEY

• HOUSEHOLD
• Income salary, rent, and interest
• Business
• Profits Total revenue Total costs
• Total costs salary rent interest