Eg. Develop an attitude for lifelong learning through books and media items provided at Libraries. The society is likely to become more civilized and sophisticated, leading to greater understanding among people with differing points of view. With increased literacy and education level, Singapore will be more competitive.
- Private bookstores such as Popular and Kinokuniya provide books for the public to purchase. If the Book Market is left to the private sector only, people will be forced to purchase books just so that they can read.
- These private bookstores have significant market power. The provision of Libraries will be a good substitute to private bookstores and curb their market power.
- The public has Imperfect Information on the benefits of Libraries. (example as stated above in orange)
Assume that the cost of reading is given by MPC = MSC, where there is no marginal external cost.
MPC: Cost of travelling to bookstore, cost of buying books
MPB: Improved vocabulary, reduced stress
- Consumers maximize their satisfaction by consuming at the point where MPC=MPB, at Equilibrium N and Output Qmkt.
- The benefits of having access to info through Libraries are also enjoyed by third parties (positive externality!), thus there is existence of MEB, as indicated by the divergence between MSB and MPB.
- The socially optimal level of output is Qpf (tbh i cant even read it), where MSB=MSC, at equilibrium M.
- There is an underconsumption of book-reading by QmktQpf Units.
- Private households and firms have failed to internalise the MEB, leading to allocative efficiency, as represented by the deadweight loss of Area LMN. The DWL incurred is due to the potential gain for societal welfare with the increased consumption of book-reading.
- The potential benefit gained (Area LMQpfQmkt) is greater than the potential cost incurred (Area NMQpfQmkt), thus incurring a welfare loss of Area LMN.
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