chapter 7 - government intervention in the market Flashcards
the role of the government in a mixed economy such as Ireland
1.a centrally planned economy - this is where all factors are owned and controlled by the state
2.a free enterprise/ capitalist economy - is where all factors of production are privately owned and controlled with minimal government interference
Ireland has a mixed economic system
so in Ireland, the government intervenes in markets to try to achieve some of its economic aims including full employment, economic growth, the provision of infrastructure, balanced regional development and the redistribution of income. It also has social aims of equality and reasonable standards of living for all, access to health/education ,decent work…
it also has environmental aims which are becoming increasingly important for the future of out world eg lowering their carbon footprint/ reducing emissions.
why does the government intervene in any market
the government may decide to not allow a market reach a natural equilibrium for different reasons.
for example, with out excise duties, petrol and cigarettes would be far cheaper which would lead to the overconsumption of goods with negative externalities, which have negative impacts on various aspects of our life and economy.
this creates externalities as these items are demerit goods.
what are demerit goods ?
demerit goods are goods where users
- over estimate the benefits of use
-underestimates the negative effects of use
-could negatively impact other people not using the goods ( negative externalities).
economic aims/objectives of the government- 1.achieve full employment
pursue policies which will improve our competitiveness, boost exports and increase enterprise in Ireland, helping to create jobs in Ireland.
economic aims/objectives of the government- 2.control government finances
they aim to reduce borrowing and help reduce our national debt, using ta revenues and controlling spending. the government aims to run a current budget surplus.
economic aims/objectives of the government- 3. protect the environment
the govt must implement policies that increase our sustainability eg to reduce single use plastics, use renewable energy, …
economic aims/objectives of the government- 4. promote balanced regional development
they will try to develop rural areas through investment in infrastructure and incentives for firms to set up there, so that economic growth isn’t centralised in urban areas only.
economic aims/objectives of the government- 5.control inflation
they aim to maintain our standard of living and purchasing power, keep prices table, avoid boom/bust cycles and maintain international competitiveness.
economic aims/objectives of the government- 6. achieve economic growth
they can offer incentives and subsidies to encourage spending/ consumption at times when the economy isn’t growing.
economic aims/objectives of the government- 7. stability in the banking sector
this was very important after the recession and bank bailout - a stable sector will allow confidence in investment in our economy, allowing for growth
economic aims/objectives of the government- 8. implement a just social policy
they should pursue policies that close the gap between the rich and poor and ensure all citizens have a decent standard of living
eg increase the minimum wage, increase social welfare/ social housing
does the government intervene in the market ? 1. provide essential services
they offer public healthcare and education- make sure all citizens have access to it without people not being able to afford it.
eg public parks, health care, education , An Garda Siochana
does the government intervene in the market ? 2. regulate markets (laws)
they use legislation to prevent anti competitive behaviour eg prevent collusion, too much monopoly power of a firm in a market.
CCPC - competition and consumer protection commission.
EPA - fine pollution by companies
does the government intervene in the market ? 3.taxation
tax on things (SSDT, carbon tax), incentivising things ( tax breaks for Cycle2work scheme ), setting price floors ( minimum alcohol unit pricing) and price ceilings ( rent caps).
does the government intervene in the market ? 4. incentivise actions
offering grants and subsidies for certain spending(Stay & spend), starting your own business( Local Enterprise Offices giving grants , monitoring,…), solar panel grants, retrofitting of houses to reduce electricity use.
