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Outline five reasons why the government may find it necessary to participate in business activities.

Outline five reasons why the government may find it necessary to participate in business activities.

Answers

joseph
1. To provide goods and services that are too sensitive to be left in the hands of private sector. The public sector is required to provide goods and services that cannot be provided through the market owing to problem of externalities which lead to market failure.
For example, the provision of national security. You cannot bar anybody from
enjoying it.
2. To provide unprofitable but essential goods and services.
3. The public sector is required to provide goods and services that cannot be provided
through the market owing to problem of ?externalities? which lead to market failure.?
For example, the provision of national security. You cannot bar anybody from
enjoying it.
4. The government must formulate and implement economic policies that are needed to
guide, correct and supplement the course that the economy will take on its‘ growth
and development over time.
5. Even where market forces are used to allocated resource, there must be a significantly
large public sector to provide regulations and laws that will provide the required
protection, otherwise there will be no property rights, and there cannot be markets
without exclusive ownership rights.
6. Laws and regulations are also needed to ensure free competition in market, free entry
to the market, free exit from the market and for consumer protection, so that in
general, the contractual obligations that arise from free market transactions cannot be
executed unless there is protection and enforcement of a government provide legal
structure.
7. Social values may require adjustments in the distribution of income and wealth which
results from the market systems and from the transmission of property rights through
inheritance. [We are talking of reducing gap between rich and poor which is as a
result of market mechanism. In capitalistic state, the rich will continue becoming
richer and poor, poorer. So something needs to be done to tax more from rich and
provide services which the poor cannot afford at a subsidized rate].
8. Private sectors invest where returns are high while public sectors look at overall
benefits of a project to the community even if returns are low. e.g. Government
provide immigration schemes, schools, hospitals etc. Such projects have no high rate
of return on investment but have greater benefits to the community. Owing to low
9. To attract foreign investment by initiating major development projects.
joseph rimiru answered the question on December 30, 2017 at 06:42

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