In this article, I will discuss the concepts of public goods , positive externality , negative externality and the black market in an explanatory and understandable way. In order to benefit more from this article, we recommend that you read our articles on the effect of the government on the market and supply and demand in the economy . Now let’s take a closer look at the situation in the markets.
Markets cannot always provide sufficient services and products, or there may be difficulties in pricing a particular service and product. In the economy, these troubled situations are called market failure . In such cases, the state may have to intervene or to correct these situations by other means. First of all, let’s explain the public goods.
We have mentioned that there is a possibility that markets cannot provide sufficient goods or services. The fact that a good or service cannot be excluded and is unrivaled indicates that the good or service cannot possibly be offered by the market.Let us briefly explain the concept of unrivaled . For example, you suffered ice cream and you bought yourself an ice cream. Can you eat this ice cream in common with any passerby? Your answer will normally be “No.. In this case this ice cream is a competitor product. But when you go to see a stage show, other people come to see it and they watch it the same way you do. Of course, there is no obstacle for you to watch this show. In this case, this stage show is unbeatable.Let us explain the concept of non- exclusion as follows. If the manufacturer of a product cannot prevent people who do not pay the product from using it, it is a product that cannot be excluded. For example, roads are open to the public and unrivaled. Naturally, no private company can be expected to build village roads. This is a duty of the state.
In some cases, an external benefit is provided from the production of a service or product to people who are not producers or consumers, that is, in any way directly connected to that product or service. This benefit is called positive externality . For example, vaccination provides positive externality. In a society with vaccination, each person vaccinated further reduces the likelihood of disease spreading in the community. That is, other people who have nothing to do with the person who has been vaccinated will also benefit from this person. We have said that this benefit is positive externality.
Products and services that provide positive externality often cannot provide sufficient benefit without government support. For this reason, the state subsidizes the production of services and products that provide positive externality.
The production of a good or service can cause external harm to people who are completely unrelated to that product or service. This effect is called negative externality . Let us explain the negative externality with an example. Unfortunately, the factories and enterprises producing near the Ergene River dump their waste in this river. Pollution also affects livestock and agriculture in that basin and poses a threat to human health. The people of the region who have nothing to do with these productions are exposed to negative externality.In the case of services and products that provide negative externalities, the state has to take measures to reduce these effects. For example, extra taxes may be imposed on manufacturers and businesses that increase the above-mentioned pollution.
In the previous articles, we mentioned the situations where the government had to intervene in the market. As a result of these interventions, it is highly probable that illegal trade, namely the black market, will occur. Against these interventions, some people try to overthrow the state by illegal means, namely the black market.When the government applies a ceiling price to a product or service, it will be difficult to find that product or service on the market. In this case, there are black marketers trying to meet the demand. By ignoring the ceiling price application, these people gain both the profit they want and the demand in the market is met.The state may apply a base price to a product or service. Demand is reduced as a result of this application. However, those who ignore this base-price practice raise demand again to a higher level with less cost. In this case, supply and demand are balanced.The fight against the black market is another task of the state.