Question

Explain how the allocation of resources can be influenced in the government budget through taxes, expenditure and subsidies.

Answer 1

Government can influence allocation of resources through taxes, subsidies and expenditure.
- By imposing taxes at higher rates, it can discourage those occupations which are not beneficial to society
- By giving subsidies, it can encourage certain industries which are beneficial to people.
- By opening public undertakings in fields where the private sector is shy of investing, it can promote public utility services.