Characteristics of economic infrastructure, Microeconomics

Assignment Help:

CHARACTERISTICS OF ECONOMIC INFRASTRUCTURE:

Natural monopoly is the situation where the provision of a good or a service has economies of scale, which are realised most when a single firm produces the entire output. If a private firm provides these services, it charges high prices and makes huge profits. Hence, Government intervention is required either to regulate the private firm or to replace it. Large upfront costs and long payback periods associated with infrastructure provision make it difficult to finance and manage. Investment in infrastructure is characterised by lumpiness or indivisibility, which implies that large amounts are required at a time. Externalities occur if the benefits or costs of producing or consuming a good affects person other than the individuals involved in a transaction. In fact, this reveals the "public good" nature of infrastructure. Public good possesses two characteristics viz.,  'non-rival' and 'non-exclusive'. Non-rivalry implies that infrastructure can be enjoyed by an extra person without reducing the enjoyment it gives others. Non-exclusiveness implies that people cannot be excluded from consuming the good. Sunk costs are the costs that have already been incurred and which cannot be recovered to any significant degree. Sunk costs can be taken as the opposites of incremental costs. Incremental costs are the costs that will change due to the proposed course of action. Only incremental costs are relevant to a decision. Thus, large volumes, sunk costs, long periods of amortisation, and prolonged project development makes the infrastructure sector investment highly risky. In addition to these main characteristics, infrastructure services have low elasticity of demand. It implies that the demand for these services is not much affected by the prices.   


Related Discussions:- Characteristics of economic infrastructure

Technology sustainability and society, Question 1: ? deduce the causal ...

Question 1: ? deduce the causal factors behind technological developments in different cultures and during different periods of human history ? assess the basis of common cr

Contribution of capital accumulation, Question:  Explain the contribution ...

Question:  Explain the contribution of capital accumulation in the progress of an economy? Capital makes the technological progress of the economy possible. Different technol

How have economists traditionally defined economic growth, How have economi...

How have economists traditionally defined "economic growth," and how is that different from "living standards growth"?  Economists have traditionally explained economic growth

Implications of privatisation for a small island economy, Question 1: (...

Question 1: (a) The Mauritian government is now increasingly involving the private sector in the development of the economy. How can government support effective private secto

How can we calculate the inflation rate, How can we calculate the Inflation...

How can we calculate the Inflation rate Inflation:   The rise in general prices and the decrease in value of money. Inflation is a sustained increase in the general price level

Calculate the output per dollar wage and unit labor cost, Using the Wage Ra...

Using the Wage Rate and Output per Hour as indicated on the table below, calculate the output per dollar wage and unit labor cost. Then decide on the optimal wage rate for this c

Help, 1. Select a data series that you wish to forecast. Make sure that it ...

1. Select a data series that you wish to forecast. Make sure that it has some importance to you relative to business, future occupation or other special interest. Obtain monthly or

Oparation research, discuss the significance of paration research

discuss the significance of paration research

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd