2.11 - gov intervention Flashcards
Government intervention
Indirect taxation
Tax placed on production / consumption
E.G VAT
Direct taxation
Taxes placed directly on individual
E.G income tax
Eval of taxation
(S) Reduces supply of demerit goods
(W) Depends on elasticity / how addictive of goods
Subsidies
Money provided by firms which reduces MC
Resolve the issue of under-production of public goods
Eval of subsidies
(S) Reduces negative externalities
(W) Increase in taxes to afford them
Government expenditure
Spending by governments of public sector
Helps resolve under-production of public goods
Eval of gov expenditure
(S) Cost of production decreases
(W) Increase in tax
Price controls
Minimum prices
Maximum prices
Minimum prices
Price floor
Price of G+S cannot go below this point
Maximum prices
Price ceiling
Price of G+S cannot go above this point
Eval of price controls
(S) Ensures consumers can afford the goods
(W) Could cause a fall in supply
Buffer stock system
Stabilisation of prices by governments
Done by buying / selling of goods by government
Eval of buffer stock system
(S) Ensures stable prices
(W) Expensive for gov
Public / Private Partnerships
Private Sector aiding in the production of public goods
Private sector funding
Eval of public / private partnerships
(S) Aids production of needs
(W) May take longer to produce
