2.11 - gov intervention Flashcards

Government intervention

1
Q

Indirect taxation

A

Tax placed on production / consumption
E.G VAT

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2
Q

Direct taxation

A

Taxes placed directly on individual
E.G income tax

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3
Q

Eval of taxation

A

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

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4
Q

Subsidies

A

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

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5
Q

Eval of subsidies

A

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

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6
Q

Government expenditure

A

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

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7
Q

Eval of gov expenditure

A

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

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8
Q

Price controls

A

Minimum prices
Maximum prices

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9
Q

Minimum prices

A

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

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10
Q

Maximum prices

A

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

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11
Q

Eval of price controls

A

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

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12
Q

Buffer stock system

A

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

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13
Q

Eval of buffer stock system

A

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

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14
Q

Public / Private Partnerships

A

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

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15
Q

Eval of public / private partnerships

A

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

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16
Q

Legislation

A

Creating laws to control production / consumption
Helps control negative externalities

17
Q

Eval of legislation

A

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

18
Q

Regulation

A

Rules in place to prohibit consumption / production

19
Q

Example of regulation

A

Smoking laws until 18

20
Q

Eval of regulation

A

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

21
Q

Eval of tradeable pollution permits

A

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

22
Q

Tradeable Pollution Permits

A

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

23
Q

Information provision

A

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

24
Q

Eval of information provision

A

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

25
Q

Competition Policy

A

Policy on regulating market structures / monopolies

26
Q

Eval of competition policy

A

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

27
Q

Government failure

A

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

28
Q

Causes of government failure

A

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

29
Q

Consequences of government failure

A

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