The need for government spending on education and health is justified by which of the following arguments? 1. Private providers generally offer services at prices lower than government institutions. 2. Investments in these sectors have long gestation periods. 3. Basic education and health are rights of citizens.

Correct Option The correct option is 2 and 3 only. Explanation Government intervention in social infrastructure, specifically education and health, is necessitated by the nature of these services as "merit goods." These sectors generate significant positive externalities for society but are often subject to market failures, such as high costs and long-term return horizons, which deter adequate private participation. Statement-wise Analysis - Statement 1 is Incorrect. Private providers operate primarily on a profit-maximization motive, which generally results in higher prices compared to government institutions. Government spending is required to provide these services at subsidized rates or free of cost to ensure affordability for low-income groups. - Statement 2 is Correct. Investments in human capital formation (education and health) have long gestation periods. The economic benefits of an educated and healthy workforce manifest over decades. Private investors, who typically seek shorter-term returns, may underinvest in these sectors, necessitating government expenditure. - Statement 3 is Correct. In a welfare state, access to basic education and healthcare is considered a fundamental right of citizens (e.g., Article 21A for Right to Education in India). It is the moral and constitutional responsibility of the government to ensure these services are accessible to all, regardless of their ability to pay. Key Takeaway Public expenditure on education and health is justified to correct market failures, manage long gestation periods of human capital formation, and fulfill the constitutional obligation of providing basic rights to citizens.

NCERT Class 11 Economics — Chapter 5: Human Capital Formation in India

mcqmedium

The need for government spending on education and health is justified by which of the following arguments?

Private providers generally offer services at prices lower than government institutions.
Investments in these sectors have long gestation periods.
Basic education and health are rights of citizens.

Official previous-year question

Verified 1 Aug 2026.

Options

A2 and 3 only
B1 and 2 only
C2 only
D1, 2 and 3

Did you get this right?

Solution

Correct Option

The correct option is 2 and 3 only.

Explanation

Government intervention in social infrastructure, specifically education and health, is necessitated by the nature of these services as "merit goods." These sectors generate significant positive externalities for society but are often subject to market failures, such as high costs and long-term return horizons, which deter adequate private participation.

Statement-wise Analysis

Statement 1 is Incorrect. Private providers operate primarily on a profit-maximization motive, which generally results in higher prices compared to government institutions. Government spending is required to provide these services at subsidized rates or free of cost to ensure affordability for low-income groups.
Statement 2 is Correct. Investments in human capital formation (education and health) have long gestation periods. The economic benefits of an educated and healthy workforce manifest over decades. Private investors, who typically seek shorter-term returns, may underinvest in these sectors, necessitating government expenditure.
Statement 3 is Correct. In a welfare state, access to basic education and healthcare is considered a fundamental right of citizens (e.g., Article 21A for Right to Education in India). It is the moral and constitutional responsibility of the government to ensure these services are accessible to all, regardless of their ability to pay.

Key Takeaway

Public expenditure on education and health is justified to correct market failures, manage long gestation periods of human capital formation, and fulfill the constitutional obligation of providing basic rights to citizens.

Your note

More from Chapter 5: Human Capital Formation in India

"A sick labourer without access to medical facilities is compelled to abstain from work and there is loss of productivity." This statement highlights the importance of which source of human capital?

easy

With reference to the concept of ‘Human Capital’, consider the following statements: 1. It refers solely to the physical strength of the workforce. 2. Unlike physical capital, human capital is not perfectly mobile between countries. 3. Human capital formation is not solely a conscious decision of the possessor. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the sources of human capital formation: 1. Social medicine refers to the use of medicine for social gatherings. 2. Preventive medicine includes vaccination. 3. Provision of clean drinking water is unrelated to health expenditure. Which of the statements given above is/are correct?

easy

With reference to ‘On-the-job training’ as a source of human capital, consider the following statements: 1. It may involve training workers within the firm or sending them for off-campus training. 2. Firms incur expenses on training as a charity without expecting returns. 3. Workers are often required to work for a specific period after training. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the relationship between human capital and economic growth: 1. Empirical evidence proves a clear cause-and-effect relationship from human capital growth to economic growth in developing countries. 2. Higher income causes the building of a high level of human capital and vice versa. 3. Convergence in human capital measures has not led to a convergence in per capita real income. Which of the statements given above is/are correct?

hard

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Correct Option

The correct option is 2 and 3 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. Private providers operate primarily on a profit-maximization motive, which generally results in higher prices compared to government institutions. Government spending is required to provide these services at subsidized rates or free of cost to ensure affordability for low-income groups.
Statement 2 is Correct. Investments in human capital formation (education and health) have long gestation periods. The economic benefits of an educated and healthy workforce manifest over decades. Private investors, who typically seek shorter-term returns, may underinvest in these sectors, necessitating government expenditure.
Statement 3 is Correct. In a welfare state, access to basic education and healthcare is considered a fundamental right of citizens (e.g., Article 21A for Right to Education in India). It is the moral and constitutional responsibility of the government to ensure these services are accessible to all, regardless of their ability to pay.