Economics of the public sector is concerned with problems that the private sector can not solve and its main subject is government with a number of measurements used to remove market failures and enable the economy to function normally. At the beginning of the fiscal year, each government must adopt a budget that contains overall revenues and expenditures. To meet the needs of society it is necessary to organize public service activities. Market failures are the inability of the market to make optimal use of resources through their actions, leading to government intervention. The four most well-known cases of market failures are indivisibility of factors and production, economy of scale, externalities and public goods. Public expenditures are government costs financed by borrowing and taxes. Taxes are fiscal revenues, tax rates are based on a taxable base that can be income or consumption. By taxes and other measures state seeks to achieve a fair distribution of income among the population. The theory of public elections examines how politicians make decisions, what influences them, and how they set economic policy goals. Public administration consists of state administration and non-public services. They are implementing a number of reforms under two doctrines: new public management and good governance.