Goods and Services at Zero Price: Governmental Policy

Subject: Economics
Pages: 2
Words: 298
Reading time:
< 1 min

The government of any nation is responsible for the efficient economy of the nation as well as the welfare of the citizens. It is because of this reason that the government will at times come to the rescue of the citizens and offer some goods and services at zero prices. This is to mean that the goods and services are given free of charge to the public by the government hence referred to as free goods. This is done on the essential commodities such as bridges, medical facilities, security and street lighting among others which when left on the hands of private investors will lead to exploitation or poor quality services and goods. If the government offers zero price, the cost of that good will be incurred by the government which sources its income from taxation. Therefore the consumers will not be eligible to pay for it. For instance, the construction of a bridge to ease congestion is an example of a zero-priced commodity since the motorists will not be required to pay for it. On the other hand, despite the cost being high, the government will incur the whole of it. Therefore, in the case that the government offers free goods, the cost of other goods will definitely go up since their taxation rates will be increased to cater for the income source of the free ones. From the example of the bridge, the government could increase the taxation on products such as fuel to source funds for the bridge hence raising the cost of fuel. If the cost of production of a commodity or service is high, the prices to consumers will shoot up simultaneously. It can therefore be concluded that the cost incurred in offering free goods is generated from the other goods or services.