Public Finance

Public finance is an important concept in economics. It studies various expenses that are incurred in governmental and collective activities. Design and administration of these activities are also important parts of public finance.

There are several constituents of public finance. To raise questions on the activities of collective and governmental bodies is an important part of public finance. Justification of these activities is also important in the overall context of public finance.

Governmental and collective bodies perform a number of important activities and functions. The financial aspect of these activities is considered in public finance. Public finance is known as government finance in a narrow sense and in a broader sense, it is referred to as public finance.

Governments Role In Public Finance

The overall role played by government or governmental bodies is an extremely important part of public finance studies. They act as points of initiation of analysis as far as public finance is concerned. It is normally assumed that if some important conditions are satisfied there would be proper distribution of goods and services among consumers.

However, that is not always the case. There are times when there is an inefficient provision of goods and services in a privately held market system. One instance of this is when consumers enjoy a good or service simultaneously then the supply of that particular good or service gets restricted in a privately held market system.

Market Failures

Market failure happens in case of inefficient provision of goods and services in a private market system. In case the market fails in a privately held market system, there is added justification for the governmental or collective provision of goods and services in a market. There are several reasons as to why there may be market failures like externalities, strong economies of scale, public goods, a network of effects, and informational advantages.

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