This course uses the basic tools of microeconomics to analyse the role of government and the rationale for and design of taxation and  expenditure policy. Emphasis is placed on attaining a solid grasp of the basic theory of public economics. The topics to be covered include a review of basic microeconomics, welfare economics, cost-benefit analysis,  public goods,  externalities,  public choice, public expenditure programs (including education, health, pensions and welfare payments),  and taxation (including efficiency and equity issues, tax incidence, Australian tax policy, and fiscal federalism).

By the end of the course students should have an appreciation of the principal forms of market failure that provide a justification for government intervention, be familiar with the main policy instruments used to mitigate market failures and the principles that guide their optimal use, but also understand the limitations of government intervention - for instance, understand how the presence of information problems both explains the forms that policy intervention take and imposes limits on what can be achieved by it.

Upon successful completion of the requirements for this course, students should be able to:
• understand the principal forms of market failure that provide a justification for government intervention;
• understand the main policy instruments used to mitigate market failures and the principles that guide their optimal use;
• understand the limitations of government intervention - for instance, understand how the presence of information problems both explains the forms that policy intervention take and imposes limits on what can be achieved by it.
• understand the trade-offs captured by public economics models; including the assumptions, relevance, and limitations of those models.
• analyse policy problems and assess arguments appearing in the policy debate.

In-class tests, a mid-semester examiniation and an end-of-semester examination. Details to be determined at the commencement of the course.

10 hours (including 3 contact hours per week)

Completion of or concurrent enrolment in ECON2101/2111 Microeconomics 2 (P or H).

Please refer to Course Website