A government department produces electricity and sells it to households at a price for each unit used. Which of the following is correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → It is a case of public production but not of public provision, because users make a direct payment
The government makes the electricity, so it is public production. Users pay for each unit, so it is not public provision (paid for by the budget, used without direct payment).
Option (1) It is neither public provision nor public production, because households pay for it — Incorrect. Payment rules out provision only. The government still produces it.
Option (2) It is a case of public provision but not of public production — Incorrect. This would be a good paid for by the budget but made by a private firm.
Option (3) It is a case of public production but not of public provision, because users make a direct payment — Correct. Made by the government, but paid for by the user.
Option (4) It is a case of both public provision and public production, because the government produces it — Incorrect. Provision needs use without direct payment, which is not the case here.
NCERT (2026-27): “Allocation Function of Government Budget … There is, however, a difference between public provision and public production. Public provision means that they are financed through the budget and can be used without any direct payment. Public goods may be produced by the government or the private sector. When goods are produced directly by the government it is called public production.” |