2.11 - gov intervention

Question 1

Indirect taxation

Answer 1

Tax placed on production / consumption
E.G VAT

Question 2

Direct taxation

Answer 2

Taxes placed directly on individual
E.G income tax

Question 3

Eval of taxation

Answer 3

(S) Reduces supply of demerit goods
(W) Depends on elasticity / how addictive of goods

Question 4

Subsidies

Answer 4

Money provided by firms which reduces MC
Resolve the issue of under-production of public goods

Question 5

Eval of subsidies

Answer 5

(S) Reduces negative externalities
(W) Increase in taxes to afford them

Question 6

Government expenditure

Answer 6

Spending by governments of public sector
Helps resolve under-production of public goods

Question 7

Eval of gov expenditure

Answer 7

(S) Cost of production decreases
(W) Increase in tax

Question 8

Price controls

Answer 8

Minimum prices
Maximum prices

Question 9

Minimum prices

Answer 9

Price floor
Price of G+S cannot go below this point

Question 10

Maximum prices

Answer 10

Price ceiling
Price of G+S cannot go above this point

Question 11

Eval of price controls

Answer 11

(S) Ensures consumers can afford the goods
(W) Could cause a fall in supply

Question 12

Buffer stock system

Answer 12

Stabilisation of prices by governments
Done by buying / selling of goods by government

Question 13

Eval of buffer stock system

Answer 13

(S) Ensures stable prices
(W) Expensive for gov

Question 14

Public / Private Partnerships

Answer 14

Private Sector aiding in the production of public goods
Private sector funding

Question 15

Eval of public / private partnerships

Answer 15

(S) Aids production of needs
(W) May take longer to produce

Question 16

Legislation

Answer 16

Creating laws to control production / consumption
Helps control negative externalities

Question 17

Eval of legislation

Answer 17

(S) Restricts negative externalities
(W) May create a black market

Question 18

Regulation

Answer 18

Rules in place to prohibit consumption / production

Question 19

Example of regulation

Answer 19

Smoking laws until 18

Question 20

Eval of regulation

Answer 20

(S) Could increase production of public goods
(W) May create black markets

Question 21

Eval of tradeable pollution permits

Answer 21

(S) Reduces negative externalities
(W) May not be accepted by all firms

Question 22

Tradeable Pollution Permits

Answer 22

Control the levels of pollution from a firm
Raises money from the selling of permits

Question 23

Information provision

Answer 23

Providing information to consumers / producers to fully understand costs and benefits

Question 24

Eval of information provision

Answer 24

(S) Helps consumers make informed choices
(W) May receive imperfect info

Question 25

Competition Policy

Answer 25

Policy on regulating market structures / monopolies

Question 26

Eval of competition policy

Answer 26

(S) Stops monopolies taking over (W) Could lead to firms leaving market / country

Question 27

Government failure

Answer 27

When government intervention to an inefficient allocation of resources + decline in economic welfare

Question 28

Causes of government failure

Answer 28

Lack of incentives Imperfect information Political self-interest Decisions for short term gains

Question 29

Consequences of government failure

Answer 29

Deadweight losses Loss in consumer surplus Decreased economic welfare Inefficient allocation of resources