1.4 Whiteboard Tasks Flashcards
What are the 7 types of government intevention?
-Minimum price schemes
-Maximum price schemes
-Indirect Taxes
-Subsidies
-Regulation
-Tradeable permits
-Provision of Information
How can an Indirect Tax reduce the consumption of a demerit good? (with graph)
Indirect Taxes increase the cost of production which then cause a firm to decrease the quantity of their good or service and so the supply decreases and shifts to the left. This then reduces the consumption of demerit goods as there is less of a supply of them.
How can a subsidy increase the consumption of a merit good? (with graph)
A subsidy can increase the money a firm has so means that they can provide an increased quantity of their good or service as they have more money to spend on the production process. This means that supply will shift to the right as supply is increasing and so it increases the consumption of merit goods for consumers as the price will also be reduced due to the subsidy.
How can a maximum price scheme increase the affordability of a necessity item? ( include graph)
A maximum price scheme is seen on a graph below the equilibrium and it makes a firm reduce their price by setting a maximum price that they can give their products or services. This helps to increase the affordability of an item as it reduces the price people have to pay and helps low income households.
What is a minimum price scheme and how does it reduce the consumption of a demerit good? (graph)
A minimum price scheme can be seen on a graph above the equilibrium and it is used to reduce the consumption of demerit goods as it puts a minimum price that firms have to charge which is an increase in price and so it means that it reduces the consumption of products such as tobacco or alcohol.
What does a supply and demand look like for tradeable pollution permits?
The supply is a straight up line and the demand is a diagonal line going from the top of the y axis to the right side of the x axis and all of the labels have permits at the end of them (s, d, p + q). Supply is perfectly inelastic as there are only a certain amount of them and where they cross is the market price for them.
What are the two main roles of state provision of information?
- Regulate buyers/ sellers to provide full information about a good or service.
- Provide info about the costs or benefits of a good or a service.
What are the three types of regulation?
1.Limiting
2.Banning
3.Requring a specific activity (focus on only that activity)
What is the impact of a quota on a supply and demand diagram?
A quota sets a maximum legal output in a market forcing market price and reducing over-consumption of demerit goods. On a graph the supply will be a straight up line to the left of the supply 1 and so the price will be increased.
What does improved information do to a supply and demand graph?
This will cause the demand to decrease as more people know more information about the product or service and so it can lead to lower demand which reduces the over-consumption of demerit goods.
