Lecture PE 5

Analyzing the public sector: Role of the government

• The markets are considered as the private sector
• The government is considered as the public sector
• Efficiency: producing what the consumer wants at the least cost.
  • Competitive market outcome maximizes the number of efficient trades and hence maximizes efficiency.

Transclude of Introduction-PE-5-2024-12-16-09.26.30.excalidraw

Questions and Tasks

what is the concept of Dead weight loss. Dominic Salvator

how does taxation lead to inefficiency in a perfect competition market?

what do you mean by Excess Burden or Dead weight loss in Layman terms? Give an example.

task Calculate the revenue/capital to GDP ratio?

• Find out if the value matches the one given in the RBI website.
• What’s the latest base year? Re-index to that year (1983-2024)
• What GDP to take in the denominator: current or constant? And state the reason?
  • Current because the expenditure is given at current.
  • • taxes = NDP
  • NDP + depreciation = GDP
• GDP at market price or GDP at factor cost? And the reason.

task Go through ENY economic watch.

what is the difference between:

• GDP vs NDP

  • Gross domestic product
  • Net domestic product
  • Total value of all goods and services produced within a country’s border during a specific period
  • GDP - depreciation of the country’s capital goods
  • NDP is preferred because it reflects sustainable production levels, by recognizing the need to reinvest in capital to maintain the current production levels.

• GDP vs GNP

  • Gross national product
  • GNP is the measure of the total goods and services produced by the country’s citizens both domestically and internationally less income earned by foreign residents.
  • Basically telling us how much of the production value is retained within the country.

• GDP @MP & GDP @FC

  • Market price: at the price that they are sold in the market including indirect taxes
  • Factor cost: value of production without including indirect taxes
  • $\text{Net indirect taxes}=\text{Indirect taxes}-\text{subsidies}$

• GDP vs GVA

  • GDP is $C+I+G+(X-M)$
  • GVA is valued at basic prices. GDP is valued at purchasers’ prices
    • Basic price is the price paid by producers for their inputs (production cost e.g. manufacturing, rent, etc)
    • It excludes any subsidies and taxes

• what are some of the PSE (Public Service Enterprises)?

  • Businesses owned and regulated by the government.
  • Essential services
  • Bharat Heavy Electricals Limited (BHEL)
  • Oil and Natural Gas Corporation (ONGC)
  • State Bank of India (SBI)
  • Life Insurance Corporation of India (LIC)
  • National Highways Authority of India (NHAI)

• what are the other insurance companies owned by the government? Other than LIC.

  • National Insurance Company Ltd.
  • General Insurance Corporation of India

• check if railways are privatized abroad.

  • Deutshe Bahn: https://int.bahn.de/en, Germany

• why was railway budget different from the general budget?

  • The presentation was separated till 2017, the presentation was then merged.