LU3 Chapter 15: The government sector - The Public Sector
LO1: List the components of the government sector in South Africa
LO2: Discuss reasons for government involvement in the economy
LO3: List the broad functions of government
LO4: Describe how government intervenes in the economy
LO5: Discuss:
1. Government failure
2. Nationalisation
3. Privatisation
LO6: Define and explain the term fiscal policy
LO7: Explain:
1. The reasons for the increase in government spending in South Africa
2. How government spending is financed
3. The criteria for a good tax
4. The different types of tax
LO8: Demonstrate, through calculations, the difference between the marginal tax rate and
the average tax rate with regard to personal income tax
LO9: Distinguish between progressive, proportional and regressive taxes in South Africa
LO10: Explain the incidence of tax
,LO1: List the components of the government sector in South Africa
The South African public sector consists of the following:
Central government – concerned with national issues such as defence, foreign
affairs, arts & culture, home affairs – Parliament
Provincial (regional) government – concerned with regional issues such as housing,
health services and education – Each Provincial Government
Local government – concerned with local issues such as sewerage, local roads, street
lighting and traffic control – All the Municipalities
Public Corporations, State Owned Enterprises (SOE’s) and other government
business enterprises – Eskom, Transnet and SAA
Central, provincial and local government are referred to as the general government
The general government and public corporations are referred to as the public sector
PUBLIC SECTOR
GENERAL GOVENMENT
CENTRAL
GOVERNMENT
(e.g. national
government
departments)
Provincial government
Local government
Public corporations
, LO2: Discuss reasons for government involvement in the economy
Market failure
Market failure occurs when the market system is unable to achieve an efficient
allocation of resources
It does not mean that nothing good has happened, but rather that the best available
outcome has not been achieved
5 cases of market failure and how government can try to correct them:
1. Monopoly and imperfect competition
2. Public goods
3. Externalities
4. Asymmetric information
5. Common property resources
1. Monopoly and imperfect competition
Monopoly, monopolistic competition and oligopoly are not allocatively efficient
1st option is for government to do nothing – trust that large profits will attract
competitors to the market
Strong firms can protect their positions in that case however
nd
2 possibility is to impose price control to prevent unduly high prices
Administrative problems
rd
3 option is to tax the full excess profits of monopolists
Monopolist can just shift part of the tax to the consumer by increasing the
prices
th
4 option is to regulate monopoly through competition policy
In the case of natural monopoly, government either regulates private production or
undertakes the production itself
LO1: List the components of the government sector in South Africa
LO2: Discuss reasons for government involvement in the economy
LO3: List the broad functions of government
LO4: Describe how government intervenes in the economy
LO5: Discuss:
1. Government failure
2. Nationalisation
3. Privatisation
LO6: Define and explain the term fiscal policy
LO7: Explain:
1. The reasons for the increase in government spending in South Africa
2. How government spending is financed
3. The criteria for a good tax
4. The different types of tax
LO8: Demonstrate, through calculations, the difference between the marginal tax rate and
the average tax rate with regard to personal income tax
LO9: Distinguish between progressive, proportional and regressive taxes in South Africa
LO10: Explain the incidence of tax
,LO1: List the components of the government sector in South Africa
The South African public sector consists of the following:
Central government – concerned with national issues such as defence, foreign
affairs, arts & culture, home affairs – Parliament
Provincial (regional) government – concerned with regional issues such as housing,
health services and education – Each Provincial Government
Local government – concerned with local issues such as sewerage, local roads, street
lighting and traffic control – All the Municipalities
Public Corporations, State Owned Enterprises (SOE’s) and other government
business enterprises – Eskom, Transnet and SAA
Central, provincial and local government are referred to as the general government
The general government and public corporations are referred to as the public sector
PUBLIC SECTOR
GENERAL GOVENMENT
CENTRAL
GOVERNMENT
(e.g. national
government
departments)
Provincial government
Local government
Public corporations
, LO2: Discuss reasons for government involvement in the economy
Market failure
Market failure occurs when the market system is unable to achieve an efficient
allocation of resources
It does not mean that nothing good has happened, but rather that the best available
outcome has not been achieved
5 cases of market failure and how government can try to correct them:
1. Monopoly and imperfect competition
2. Public goods
3. Externalities
4. Asymmetric information
5. Common property resources
1. Monopoly and imperfect competition
Monopoly, monopolistic competition and oligopoly are not allocatively efficient
1st option is for government to do nothing – trust that large profits will attract
competitors to the market
Strong firms can protect their positions in that case however
nd
2 possibility is to impose price control to prevent unduly high prices
Administrative problems
rd
3 option is to tax the full excess profits of monopolists
Monopolist can just shift part of the tax to the consumer by increasing the
prices
th
4 option is to regulate monopoly through competition policy
In the case of natural monopoly, government either regulates private production or
undertakes the production itself
