3.1.16 the role and effect of indirect taxation, subsidies, regulations, advertising and direct provision as forms of government intervention in the market address market failure

Question 1

How do subsidies help essential industries?

Answer 1

Subsidies reduce costs for industries like agriculture and renewable energy, ensuring food security, job creation, and environmental sustainability.

Question 2

How do subsidies encourage innovation?

Answer 2

By funding research and development (R&D), subsidies help businesses develop new technologies and products, leading to economic growth.

Question 3

How do subsidies improve social welfare?

Answer 3

Subsidies in healthcare, education, and housing make essential services more affordable, reducing inequality and improving living standards.

Question 4

How do subsidies correct market failures?

Answer 4

They encourage the production of positive externalities (e.g., education, clean energy) and address underproduction of socially beneficial goods.

Question 5

minimum wage

Answer 5

in a free and perfectly competitive labour market wages would be set at equilibrium through changes in demand and supply