PMAC5112 · ECONOMICS 1B
LEARNING UNIT 3
THE GOVERNMENT / PUBLIC SECTOR
COMPREHENSIVE MASTER STUDY GUIDE
Combined from both uploaded LU3 slide decks. Includes detailed explanations, terminology,
comparisons, worked examples, source diagrams and exam practice.
IMPORTANT SOURCE RULE
This expanded guide uses only information contained in the two uploaded LU3 PDFs. Where the two decks use different examples,
wording or tax tables, both are retained and labelled rather than silently replacing one with the other.
WHAT THIS VERSION ADDS
More of the actual slide content is retained, repeated concepts are consolidated instead of deleted, key terms are explicitly
defined, the logic behind graphs is written out, and the practice questions from the source decks are collected at the end.
CONTENTS
01 Public sector & components of government
02 Efficiency, equity & market failure
PMAC5112 · Economics 1B · LU3 Comprehensive Master Guide Page 1
, 03 Monopoly & imperfect competition
04 Public goods & the four types of goods
05 Externalities: negative + positive
06 Coase theorem
07 Asymmetric information
08 Common property resources
09 Other reasons government intervenes
10 The three functions of government
11 Methods of government intervention
12 Government failure + rent-seeking
13 Nationalisation vs privatisation
14 Fiscal policy
15 Government spending + financing
16 Budget deficits + public debt
17 Taxation + criteria for a good tax
18 Direct/indirect + general/selective taxes
19 Progressive/proportional/regressive taxes
20 Personal income tax + tax brackets
21 Marginal vs average tax rate
22 Tax incidence
23 Tax burden + crowding out
24 Master comparisons + exam checklist
25 Source practice questions
PMAC5112 · Economics 1B · LU3 Comprehensive Master Guide Page 2
, PMAC5112 · ECONOMICS 1B 01
Public sector & components of government
PUBLIC SECTOR
The public sector comprises organisations owned or controlled by government. Its purpose is to provide essential services and
support economic development.
● Deliver essential public services
● Promote economic growth
● Improve quality of life
● Correct market failures
● Protect the public interest
SLIDE EXTRACT · Components of government — Public Sector slides
National/central, provincial/regional, local government and public corporations.
Central / national government: deals with national issues such as defence and the relationship with the rest of the world. The
Public Sector deck gives examples including the Department of Basic Education, National Treasury and Department of Health.
Provincial / regional government: deals with regional issues such as health, housing and education. Examples include
provincial hospitals, education departments and roads.
Local government: provides local services such as sewerage, local roads, street lights, water supply, electricity distribution and
refuse removal.
Public corporations: government-owned enterprises / state-owned enterprises. Examples in the decks include Eskom,
Transnet, PRASA and historically SAA.
DECENTRALISATION
The Chapter 15 deck says decentralisation means most decisions are privately made, as in free-market economies. The central
question is the appropriate mix between market and government decision-making.
PMAC5112 · Economics 1B · LU3 Comprehensive Master Guide Page 3
LEARNING UNIT 3
THE GOVERNMENT / PUBLIC SECTOR
COMPREHENSIVE MASTER STUDY GUIDE
Combined from both uploaded LU3 slide decks. Includes detailed explanations, terminology,
comparisons, worked examples, source diagrams and exam practice.
IMPORTANT SOURCE RULE
This expanded guide uses only information contained in the two uploaded LU3 PDFs. Where the two decks use different examples,
wording or tax tables, both are retained and labelled rather than silently replacing one with the other.
WHAT THIS VERSION ADDS
More of the actual slide content is retained, repeated concepts are consolidated instead of deleted, key terms are explicitly
defined, the logic behind graphs is written out, and the practice questions from the source decks are collected at the end.
CONTENTS
01 Public sector & components of government
02 Efficiency, equity & market failure
PMAC5112 · Economics 1B · LU3 Comprehensive Master Guide Page 1
, 03 Monopoly & imperfect competition
04 Public goods & the four types of goods
05 Externalities: negative + positive
06 Coase theorem
07 Asymmetric information
08 Common property resources
09 Other reasons government intervenes
10 The three functions of government
11 Methods of government intervention
12 Government failure + rent-seeking
13 Nationalisation vs privatisation
14 Fiscal policy
15 Government spending + financing
16 Budget deficits + public debt
17 Taxation + criteria for a good tax
18 Direct/indirect + general/selective taxes
19 Progressive/proportional/regressive taxes
20 Personal income tax + tax brackets
21 Marginal vs average tax rate
22 Tax incidence
23 Tax burden + crowding out
24 Master comparisons + exam checklist
25 Source practice questions
PMAC5112 · Economics 1B · LU3 Comprehensive Master Guide Page 2
, PMAC5112 · ECONOMICS 1B 01
Public sector & components of government
PUBLIC SECTOR
The public sector comprises organisations owned or controlled by government. Its purpose is to provide essential services and
support economic development.
● Deliver essential public services
● Promote economic growth
● Improve quality of life
● Correct market failures
● Protect the public interest
SLIDE EXTRACT · Components of government — Public Sector slides
National/central, provincial/regional, local government and public corporations.
Central / national government: deals with national issues such as defence and the relationship with the rest of the world. The
Public Sector deck gives examples including the Department of Basic Education, National Treasury and Department of Health.
Provincial / regional government: deals with regional issues such as health, housing and education. Examples include
provincial hospitals, education departments and roads.
Local government: provides local services such as sewerage, local roads, street lights, water supply, electricity distribution and
refuse removal.
Public corporations: government-owned enterprises / state-owned enterprises. Examples in the decks include Eskom,
Transnet, PRASA and historically SAA.
DECENTRALISATION
The Chapter 15 deck says decentralisation means most decisions are privately made, as in free-market economies. The central
question is the appropriate mix between market and government decision-making.
PMAC5112 · Economics 1B · LU3 Comprehensive Master Guide Page 3
