1.4.6 Provision of information

Question 1

Why do governments try to improve access to information?

Answer 1

A lack of information can lead to consumers not being also be take rational choices. If consumers don’t know the true benefit, they may consume too much or too little.

It addresses asymmetric information.

Question 2

Examples of government-provided information include

Answer 2

• School and hospital performance league tables
• Advertising campaigns encouraging healthy eating
• Compulsory food labelling for most foods
• Health warnings on cigarette packets

Question 3

How does government provision of information impact demand for certain goods?

Answer 3

Governments will try to increase demand for merit goods and reduce the demand for demerit goods.

Question 4

Is improved provision of information effective?

Answer 4

The effectiveness of government information provision is often questioned.

For example, the growing obesity problem in the UK suggests that government healthy eating campaigns aren’t having a significant impact on the public.

Question 5

Examples of how governments have tried to improve the provision of information to reduce the consumption of demerit goods.

Answer 5

• Smoking – Health information on cigarette packets.
• Alcohol – Label includes number of units.
• Food/drink – Calories are included on the label.

Question 6

Example | Antibiotic usage

Answer 6

The government regularly ran a public information campaign about antibiotic use, mostly consisting of adverts telling the public to only take antibiotics as directed by their GP. This was done to correct a lack of information where people wrongfully assumed antibiotics could cure everything.

Question 7

Example | Energy Performance Certificates (EPCs)

Answer 7

These are needed whenever a property is built, sold or rented. By law, all public buildings must display their energy performance certificates. It was directed under EU law that appliances such as fridges, freezers, dishwashers and ovens must show their efficiency to inform the producers.

Question 8

How will the provision of information change an externalities diagram?

Answer 8

Assuming the information campaign is successful:

• The MPB will shift, making welfare loss smaller.