1. Economic Functions of Government
SSEF5 The student will describe the roles of government in a market economy.
a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures.
b. Give examples of government regulation and deregulation and their effects on consumers and producers.

2. Would you…? Pay for some other child’s school?
Pay for somebody else’s bus ride?
Pay to clean a restroom at a park?
Pay to build a new road outside of your house?
If you have answered no to these questions, then you understand why we need government interaction in the economy.
If you answered yes…well…congrats! You’re a great human being.

3. Government’s Role 1) Provide a Legal System 2) Maintain Competition
3) Public Goods and Services
4) Redistribute Income
5) Correct Market Failures
6) Stabilize the Economy

4. Provide a Legal System
Make and enforce laws to protect private property rights
Examples:
courts, monetary system

5. Maintain Competition
Regulates monopolies
Examples
Anti-trust laws

6. Public Goods and Services
Uses tax dollars to provide goods and services that private individuals wouldn’t provide
FREE RIDER PROBLEM- available to everyone, even those who don’t pay.
Examples:
Parks, national defense, schools

7. Redistribute Income
Taxing large income groups to provide for those in need
Examples: social security, medicare, medicaid

8. Resolve Market Failures
Corrects externalities
Positive externality- unintended benefit
Negative externality- unintended cost
Examples:
Environmental pollution, subsidies, education

9. Stabilize the Economy
Reduces unemployment and inflation and promotes economic growth
Examples
Government budgets, monetary supply

10. Deregulation, regulation, and effects
Interstate Commerce Commission (ICC)
All new entrants must have licenses
Motor Carrier Act of 1980 deregulated
Number of carriers doubled in 4 years
IBM – broken apart through regulation
Allowed smaller companies to flourish and gain in the computer industry