A brief description about Public Finance

1. PUBLIC
FINANCE
AN OVERVIEW
DR. Mani Arora
Assistant Professor -Commerce

2. In this Presentation
We will Learn
1) Meaning of Public Finance
2) Definition of Public Finance
3) Elements of Public Finance
4) Difference between Public and
Private
5) Principle of Maximum Social
Advantage

3. Meaning Of Public Finance
 Public Finance Means Finance of public which is collected and spent by the
government on and for the public.
 Finance includes both Revenue and Expenditure
 It is a field of Economics which deals with how to pay for the Government
activities, how to plan for it and administer those activities
 Public Finance collectively deals with the mass and not the individuals
 It works on the principle of Maximum Social Advantage

4. Definitions Of Public Finance
Public Finance is one of those subjects which lie on the border line between economics and
Politics. It is concerned with the income and expenditure of the public authorities, and with the
manner one is adjusted with another” According to Dalton
It is the branch of Economics which deals with the income and expenditure of the Government.
“Adam Smith”

5. Elements of Public Finance
1)Public Expenditure
2)Public Revenue
3)Public Debt
4)Financial Administration
5)Federal Finance
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6. Difference Between Public and Private
1) Public Finance
ownership lies with the
Government
2) The responsibility of
Generating the revenue
and where to Spend is of
Government
3) Expenditure is estimated
first and on its basis
Revenue sources are
determined
4) Prime Motive is Public
1) Private Finance
ownership lies in the
hands of individual.
2) The responsibility of
generating the
income and where to
Spend is of individual.
3) First Income is
Generated and on its
basis Expenditure are
determined
4) Prime Motive is profit
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Public Finance Private Finance

7. Modern View Points
“Every Expenditure derives
its utility on the fact that
how much welfare is done
to the society by the state
Classical View
Points
Adam Smith, J.B.Say,
“ Function of State
should be limited one”
Principle of Maximum SocialWelfare/ Maximum
Social Advantage/ Maximum AggregateWelfare

8. Principle of Maximum SocialWelfare
Hugh Dalton has propounded this principle .
According to him
1)Government should collect the money and spent it
for the welfare of the public.
2)When taxes are imposed disutility is created and
when expenditure is done utility is created.
3)Government must adjust its revenue and
expenditure in such a way that the surplus of utility is
maximum and dis utility is minimum
4) This Theory is based on Law of Diminishing
Marginal Utility 8

9. 1) Safety and Security of the Community
2) Improvement in Distribution
3) Provisions of Future
4) Increasement in the Level of
Production
5) Stability and Full Employment
Measurement of social Advantage

10. Principle of Maximum SocialWelfare
Hugh Dalton has propounded this principle with
reference to two terms
1)Marginal Social Sacrifice(MSS)
2)Marginal Social Benefit(MSB)
Maximum Social Welfare can be derived as where
MSS=MSB
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11. Principle of Maximum SocialWelfare
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12. The word Budget is derived from the French
Word ‘Bougettee’ which means a bag or a
wallet.
Budget is an annual statement of income
and expenditure and it is a comparative
statement, in which amount of revenue and
items of expenditure for a year are shown.
According to Shirras “ Budget is statement
of income and Expenditure which is
prepared for meeting out the estimated
expenditure of the Government. Budget is a
proposal which shows the deficit or surplus
of income an expenditure estimates”.
According to Philip E tailor” The Budget is
the master financial plan of a Government”
PUBLIC BUDGET(Techniques of Budgeting)