1.4.1 Information Provision Flashcards
What is information provision?
It’s government funded information provision through advertising and education to encourage or discourage consumption
How is this a market friendly policy?
It informs consumers why they should consume merit goods instead of De-merit goods
Explain the effect that positive information provision has on marginal private benefits for merit goods?
Information provision can lead to the marginal private benefit shifting more closer to Q Star and in the market quantity rises to Q Star
Explain how negative information provision on De-merit goods affects the marginal private benefit?
Negative information provision this demand for De-merit goods shift left
Consumers now make rational decisions as they know the true marginal private benefit when consuming these goods
Least the less consumption of demerit goods and over consumption is solved
Socially optimum level reached
Maximum Efficiency will be hit with maximum welfare market
What are the advantages of information provision?
Helps consumers to act rationally allows market to work properly
Allows allocative efficiency to be reached and solves the consumption issues with merit and demerit goods
What are disadvantages of information provision can be used for evaluation
It can be expensive for the government to do incurring an opportunity cost
No guarantees of success if it will encourage more or less consumption if policy is poorly targeted poor quality and more people ignore it
It’s a long run not short run takes time to absorb information and time for consumers to repeatedly see the ads
Government themselves may not always have all the information
