Highlight the basic concept of the theory of public finance and explain how do they help in understanding the fiscal system of an economy.

The theory of public finance is a cornerstone in economics, focusing on the role of government in the economy. It encompasses principles and frameworks that guide governments in revenue generation, resource allocation, and expenditure to achieve economic and social objectives. Understanding this theory is pivotal in comprehending the fiscal system of an economy and its impact on the overall economic and social environment.

Basic Concepts of the Theory of Public Finance:

1. Public Goods: Public goods are non-excludable and non-rivalrous in consumption. They are provided by the government because the market tends to underprovide them due to the free-rider problem. Examples include national defense and street lighting.

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