Economic Concepts Revision U1 AOS 1 Flashcards
microeconomics
Microeconomics studies the behaviour and performance of individual consumers, businesses or markets in the economy
macroeconomics
Macroeconomics studies the overall behaviour and performance of the whole nation or global economy
microeconomics key points
- the operations of a particular firm
- the nature of a single industry
- the output, employment and prices in an individual market
macroeconomics key points
- the total value of a nations spending
- the total value of a nations production
- the nation’s level of unemployment
- the nation’s inflation rate
what’s the difference between micro and macroeconomics
micro
- market
- effect of prices of goods
- labour market
- consumer behaviour
- supply of goods
macro
- GDP
- inflation
- employment & unemployment
- aggregate & demand
- capacity of economy
decide if these are micro or macro related issues
1. excise tax on petrol is halved during 2022 to ease cost of living pressures
2. Aus’s rate of inflation soar’s above 5% during 2022
3. young investors are demanding crypto currencies in the hope of becoming rich
4. the war in Ukraine caused gas and oil shortages in 2022
5. the unemployment rate dropped below 4% during 2022
what is positive economic analysis
Analysis of economic issues that can be proved or disproved based on hard fact or evidence
“If…then..else…”
what is normative economic analysis
Analysis of economic issues that are subjective or opinionated views of what is happening in an issue or one thinks should be done about it
Used when it’s hard to find fact/evidence
“It should..”
compare positive vs normative analysis
positive
- free of personal opinion
- based on fact and evidence
- can be proved/disproved
normative
- not based on tested fact
- based on personal opinion
- can be proved or disproved
decide whether these statements are positive or normative
- company tax cuts should increase in economic activity
- the Aus govt is spending an insufficient amount on education
- Aus is one of the wealthiest countries in the world
- Aus’s minimum wages are too low
- legalising marijuana for medical purposes will increase the rate of illegal drug use
- An oversupply of crude oil contributed to lower crude oil prices over 2015- 16
what are goods + egs
Goods are material or physical objects capable of satisfying our needs and wants.
They may be of a lasting form (durables) or they may be single-use items.
what are services + egs
Services are non-material performances or actions produced by people capable of satisfying our needs and wants.
need
A need is a good/service essential for survival and function.
want
A want is something desired that is not essential for survival and function.
decide whether these are needs or wants
house
television
mobile phone
motor vehicle
train services
food and water
underwear
dinner suit
digital tablet
what goods and services would meet the needs and wants
wifi
battery
friends
family
food
water
shelter
air
protection etc
what does economics involve
Economics involves making decisions on transactions with the goal to satisfy ones needs and wants
production
what is produced
income
what is earned
expenditure
what is spent
What might be transacted between production, income and expenditure?
flow of income is created. This income, which flows to households from firms, is then spent by the households on the goods and services that were produced, and as they spend, a flow of spending
How do transactions in an economy achieve the goal of satisfying needs and wants?
the transactions in an economy achieve the goal of satisfying needs and wants because these transactions lead to the production of resources that households recieve income from and then are able to spend on goods and servicies that satisfy their needs and wants.
decide whether each of these is a factor of production, income or expenditure
jane earns $100 from her employer, 7 eleven
dylan, a council employee, prunes roses in the local park
britany buys a new car from Kia
ming sends a text to his gf
tian receives tutoring from a 1st yr uni student
a farmer harvests her crop of apples
jane signs up to a spotify subscription
bazil downloads an economics app from iTunes
anita calls her mother using her mobile phone
zaynab buys a pie from the canteen
economics definition
Economics is the study of
how we choose to use limited resources
in ways that best
satisfy our basic needs
and unlimited wants.
what are resources
Resources: (aka factors of production) are inputs used to produce goods & services
land resources
natural
labour resources
effort that humans/workforce contribute to
capitol resources
equipment/buildings used to produce goods and services eg machinery, tools
Entrepreneurship
Entrepreneurship is actually another factor of production, but is not covered in the study design.
Why is a resource like money or time not considered a factor of production?
Money (how much $) is just a medium used for exchange and not directly involved with production
decide if these resources are land, labour or capitol resources
tractor
computer used at home
teacher
mineral sands
computer used at Aus post
great barrier reef
a computer programmer
the PM of Aus
motor car used as a taxi
farmland
what is relative scarcity
Relative Scarcity is
where needs and wants for goods/services > resources available
what are examples of resources that are scarce
Limited oil reserves
Shortage of skilled labor in a tech industry
Limited investment capital available for tech startups
Limited availability of high-tech materials
info on earth overshoot day
Earth Overshoot Day marks the date when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that year.
what is opportunity cost + a GOOD example
Opportunity Cost is the next best alternative/option given up (or “forgone”) in order to meet prioritised needs/wants
meaning as our resources are limited, if we use a resource in one thing, then we cannot use/reallocate that same resource to another.
eg If you spend time watching TV, you cannot spend that time studying.
Here, time is the resource.
The choice is Entertainment.
The Opportunity Cost is less studying.
i.e I lost the opportunity to study because I chose to allocate the time for entertainment instead.
what are trade offs + egs
Trade-offs are about sacrificing one thing for another.
Similar but broader in scope than opportunity cost
Sacrificing as opposed to reallocating resources
Eg, saving for the future instead of spending on things now (Sacrificing happiness for security)
opportunity cost vs trade offs + comparison eg
opportunity cost refers to what a person could have done with what was sacrificed
refers to the next valuable opportunity
trade off - describes what is sacrificed to get something else
refers to two opportunities or more with choice
Opportunity Cost: what next best alternative did you give up to get what you want?
It cost me the opportunity to produce 1 fish, for every 1 banana
Trade off: the giving up/sacrifice of one thing in return for something else?
I sacrificed producing fish so I can produce bananas
what is a CBA?
Cost-Benefit Analysis: Value-based decision-making that involves comparing the cost against its expected reward
why do governments often use a CBA
Governments and firms often use a cost-benefit analysis to help them decide where resources should be allocated.
what is a benefit cost ratio
what is a good ratio/bad ratio + formula
Benefit to cost ratio (BCR): Divide total benefits by total costs.
BCR > 1.0 = Net benefit = good ☺
BCR < 1.0 = Net cost = bad ☹
eg of CBA
Create and share you own Cost-Benefit Analysis of one of the following:
To do all your homework vs not
To do subject X vs subject Y
To buy X vs Y
To study at uni what your parents
want vs what you really want
Choose you own to analyse
Calculate the BCR. What’s the verdict?
decision making and its examples
making decisions based on prioritised needs and wants
eg buying the car or saving for a house
why maximise production
Scarce resources are used in ways that maximise a nations productive output of goods and services
If the maximum output of goods/services are being produced then it is more likely our needs and wants will be met
i.e this will improve living standards
We also want to minimise the opportunity cost/trade-offs of the decisions that we make
Productive or technical efficiency:
Productive or technical efficiency: productivity is maximised through minimum inputs (resources) and maximum output(at productive capacity)
Allocative efficiency
Allocative efficiency: scarce resources are directed into producing goods/services that help more satisfy society’s needs and wants over other goods/services (opportunity cost)
is productive always = to profitable
productive is not always most profitable
what is a PPF + what do the different parts of a PPF tell us? + egs
Also known as PPD (Production Possibilities Diagram)
A tool used to highlight concepts such as:
Opportunity cost: What options are missed out
Productive capacity: how much a nation/firm can produce
Productive efficiency: How efficient are we producing goods/services with the given resources
what assumptions does a PPF graph rely on
Only two goods/services are produced in the economy
All resources can be used in the production of either good
Each unit of resource, goods and services are worth the same value
At any given point in time, the economy’s productive capacity is limited by the curve
what do the different points on a PPF tell us
Any points along the line shows the productive capacity of different maximum combinations of goods and services produced where all resources are fully used
Therefore, on the PPD, any point on the line is productively efficient
Any point under the line however means resources are under-utilised
Any point outside the line means a nation’s resources are over-utilised
What if Productive Capacity isn’t enough to meet needs?
how do we increase productive capacity
We could try to
increase quantity (volume)
and/or
improve quality (effectiveness)
of resources available.
What does increased productive capacity look like on the PPF?
The curve shifts outwards
Productive Efficiency PPF – Computers or Guitars? using data on ppt 3 slide 18 create a graph + answer questions
If the economy moves from point A to point B, they can produce 50 guitars that were not previously possible. What is the opportunity cost of this decision?
Describe the problem if the economy was producing 250 guitars and 200 computers. How could this be improved?
Describe the problem that might result if there was demand for 400 guitars and 450 computers. How could this be solved?
What is the opportunity cost if the country decides to produce at Point A or F?
Inefficient Allocation of Resources? connected to card 53
But what if no one needs/wants guitars?
Where on the PPF would be the most inefficient and wasteful points at which to produce? (why + consequences)
Allocative Efficiency + eg
All resources should be fully utilised and allocated to producing goods and services that meet a nations prioritised needs and wants
For example, one nation in wartime might need to reallocate their metal resources to produce weapons more than cars; during peacetime it might do the opposite.
How many points can have Efficient Allocation of Resources on a PPF
On the PPF, only one point on the line can be most allocatively efficient
What if resources aren’t allocated properly? + what to do this in scenario
Resources not allocated properly to meet needs is called “Market Failure”
Usually requires some intervention or regulation (government) to correct (eg (disincentives, excise taxes, tariffs, subsidies etc)
What if resources aren’t allocated properly?
Market failure can also occur due to:
Monopolies/concentrated Market Power
Market failure can also occur due to:
Allocation of resources to produce demerit goods
(alcohol, cigarettes, etc)
These create negative externalities (negative effect to third parties)
Eg; cancer from second-hand smoke; victims of alcohol-fuelled violence
Monopolies/concentrated Market Power
Eg; a sole producer of goods/services can set higher prices and at lower quality . But consumers have no choice but to buy them due to lack of competitors)
Material Living Standards
refers to the nation’s access to
quantities of goods and services to satisfy needs and wants
Non - Material Living Standards
refers to the nation’s quality of life beyond their ability to access goods and services
what do Material Living Standards reflect…
Level of consumption of goods and services per person
Income per person
The purchasing power
refers to how much you can buy with your money. As prices rise, your money can buy less. As prices drop, your money can buy more.
what do non - Material Living Standards reflect
The quality of daily life
Happiness
Life expectancy
Mental and physical health
Freedom
The state of the environment
Leisure time
Crime rates
Literacy rates
Quality of relationships
decide whether these are material or non material
see ppt 4 slide 7
what happens when you do vs don’t improve a a nations Living Standards
when you do
- happier people
- peace and harmony
- willingness to share
when you dont
- riots
- unrest
- selfishness
what is the goal of everyone and every nation
The goal of everyone and every nation is to improve living standards
define economic activity
the activity of making, purchasing, or selling goods and services
what is economic activity
producing, purchasing, selling goods and services with the limited resources available to satisfy society’s needs and wants and thus improve overall living standards.
how do we measure economic activity
using GDP
What is GDP and what does it represent
Gross Domestic Product (GDP):
A numerical measure of economic activity
Represents the total value of finished goods and services produced by a nation
Is often (inadequately) used as a measure of a nations living standards
what is the key to economic growth + how does the cycle work
CONSUMPTION!!
More consumption means more goods/services demanded..
More demand means more production needed to meet it..
More production means more employment and higher wages offered..
More jobs/higher wages means more income..
More incomes means more consumption..
The positive effects of HIGHER levels of economic activity on material living standards
To meet demand for more goods/services, businesses offer higher incomes and/or more jobs to consumers
This allows consumers to fulfil more of their needs and wants due to increased ability to spend
This results in higher material living standards
The negative effects of HIGHER levels of economic activity on material living standards
But!
However too much consumption could lead to inflation (rising prices)
as businesses take advantage of higher demand (maximise profits)
or due to not having enough supply to meet
it (scarcity)
This increases the cost of living
The positive effects of HIGHER levels of economic activity on NON-material living standards
Being employed or higher incomes:
helps reduce stress and social isolation,
strengthens mental and physical health,
improves the quality of relationships.
This results in higher non-material living standards
The negative effects of HIGHER levels of economic activity on NON-material living standards
But!
However, higher production from higher economic activity can:
Increase pollution and other environmental issues
as well as social issues such as burnout and time away from family
The negative effects of LOWER levels of economic activity on material living standards
As firms cut production due to less demand, less resources including labour are needed.
Unemployment increases, reducing
average incomes and consumption.
This means consumers can fulfil less of their needs and wants due to decreased ability to spend
This results in lower material living standards
The positive effects of LOWER levels of economic activity on material living standards
literally nothing lol
The negative effects of LOWER levels of economic activity on NON-material living standards
Unemployment and reduced/lost income can lead to:
poverty
homelessness,
possibly higher crime rates,
social isolation,
reduced mental and physical health,
unhappiness, increased stress and
feelings of personal failure.
This results in lower non- material living standards
The positive effects of LOWER levels of economic activity on NON-material living standards
However, a possible upside is that there is less pollution and pressure on the environment.
For each of the following scenarios, explain the effect on Economic Activity and the impact on material and non-material living standards:
(Tip: Think what happens to consumption levels)
A 3.3% increase in Australia’s minimum wage.
Is this response acceptable?
“A 3.3% increase in Australia’s minimum wage causes Economic activity to grow. This results in MLS and NMLS increases.”
What’s missing? What could be improved?
b) Tropical cyclone hits North Queensland devastating vast crops.
c) Taylor Swifts Eras Tour hits Australia with massive influx of fans locally and overseas.
what are the 4 main parts of wrg a good response + egs
Factor - identify the factor that is causing the change, what are the consequences (pos or neg)
changes - what do businesses, consumers, and govt do in response. what motivates this response? why/how does it affect others?
link what is the link/effect to economic activity
outcome - how does it affect material and non - material living standards
see egs on ppt 4 slide 29
what does relative scarcity mean for nations and firms
What and how much to produce?
How to produce?
For whom to produce?
what are the 4 types of economic systems
Traditional economies
(pure) Market economies
(pure) Planned/Command economies
Mixed economies
traditional economies + key features
Typically found in remote villages and areas run by tradition and tribal customs.
- focused on family of the tribe
- society is hunter - gatherer or nomadic
- trade is based around a system of a barter
- only what you need is produced
- in the long term, a currency for trading is created
3BQ on Traditional Economies
What and how much to produce?
Only what is needed to survive. Influenced by seasonal conditions.
2 How to produce?
Basic tools for farming, hunting and supporting survival
3 For whom to produce?
Tribe or family, distributed by custom (seniority first or by need)
(Pure) Market Economies + key features
What is it?
Doesn’t exist in pure form
Societies with democratically elected governments who do not intervene in the running of the economy.
- private property
- freedom to choose
- self interest is a motive
- competition
- system of markets and prices
- no government regulation in a pure market economy
3BQ on Market Economies
1 What and how much to produce?
Based on consumer sovereignty (customer is king); their needs/wants determines goods/services made.
Consumers will compare and choose goods/services due to relative prices
2 How to produce?
Resources (factors of production) are used to produce goods and services.
How a business will produce goods and services will depend on: Efficiency, Quality, and Costs of resources used
3 For whom to produce?
Prices are set based on demand, supply, and the costs of production, (especially labour (wages)).
Only those who can afford the
goods/services can have it.
Consumers are rewarded for their economic contribution whereas others will miss out (either fairly or due to circumstances outside their control), which leads to inequality.
(Pure) Planned/Command Economies + key features
What is it?
Doesn’t exist in pure form;
non-democratic, powerful governments that decide everything.
- central economic plan by government
- resources allocated by govt based on this plan
- central plan used to prioritise production of g&s
- laws and directives of govt support this plan
- monopoly businesses carried by govt
3BQ on Planned/Command Economies
1 What and how much to produce?
Government plan and implement production targets and resources allocated based on what they think is needed/wanted; consumers have no say/input.
2 How to produce?
Government owned, usually non-profit driven.
Lack of incentive to improve productive efficiency which reduces productive capacity
3 For whom to produce?
Government sets prices and wages levels to reduce inequality and ensure all can access essential needs in goods and services.
However there is :
reduced productive efficiency
lower incomes
& less availability of goods/services
to meet actual wants/needs
This results in lowered living standards
Mixed Economies + key features
What is it?
Mixes most of the ideas from market economies with planned economies to get the best of both worlds. Thus a dominant private sector for markets and a smaller public sector to regulate and intervene as needed.
- most decisions are made by the operation of markets and relative prices
- however, these is govt intervention in some markets to improve outcomes and reduce market failure
3BQ on Mixed Economies
1 What and how much to produce?
Consumer sovereignty still reigns but government will step in when there are signs of market failure.
Some essential or ideal products that are expensive to produce may be subsidised by government so everyone can afford them
2 How to produce?
Private businesses will try to maximize profits, but may cut corners to do so.
Governments regulate and enforce standards for product quality, workplace safety and environmental protection
3 For whom to produce?
Those providing scarce resources (eg labour skills) receive highest incomes to purchase more goods and services, and vice versa.
As this may lead to inequality, Governments provide welfare support payments and other subsidies to support those who cannot afford to fulfil basic needs and wants.
what are public sector organisations + egs + pros and cons
Public sector organisations are owned, controlled and managed by the government or other state-run bodies to provide goods/services to the community. People working for public organisations are called Public servants
Examples are Public schools, Public hospitals, Government agencies (eg Centerlink)
Pros: Not profit driven but service driven. Usually free or subsidised for consumers.
Cons: Can be inefficient production (bureaucracy). Funded and thus limited) by taxes collected and allocated.
who are PSO’s controlled by + pros and cons
Private sector organisations are owned, controlled and managed by individuals, groups or business entities.
Pros: Efficient production, aims to maximize shareholder returns. Competition could result in lower prices
Cons: Can be profits over people and planet
decide whether these are public or private sectors
centre link
optus
vic state govt
royal childrens hospital
telecom aus
mhs
medicare
medibank
scotch college
privitisation
When an organization that was public moves to private ownership it is called privatisation (eg Telecom -> Telstra)
who are the 3 economic agents involved in circular models
household sector (consumers)
business sector (producers)
government sector
household sector + goals
individuals who are both consumers of goods and services and who are also suppliers/owners of resources.
consumer satisfaction
business sector + goals
businesses or producers of goods and services who also demand resources from the household sector.
profit and corporate social responsibility
government sector + goals
govts that receive revenue from taxes, then use it to develop infrastructure, provide subsidies
taxes can be from income, tariffs (trade tax), company tax, excise tax, g&s tax
quality of life, competitiveness of society, and public safety
why do we use The 3 Sector 4 Flow Circular Model
We use the 3 Sector 4 Flow circular model to visualize how the economy actually works
We also note 4 flows (transactions) within the economy.
They are equal in $ value. The higher value = higher economic activity
They are interdependent; a change in one affects the others
Flow 1
Flow 1 — the nation’s supply of resources:
Household sector sells (supply) resources (i.e. land, labour, capital) to the business sector.
Flow 2
Flow 2 — the demand for resources and the payment of national incomes:
Businesses buy (demand) resources from the household sector to produce goods and services.
Businesses pay incomes to households in return
Flow 3
Flow 3 — the nation’s spending of incomes or demand for goods and services:
After paying government taxes on incomes, households spend the rest on purchasing goods and services for themselves
The government spends taxes to purchase goods and services to support the nation.
Flow 4
Flow 4 — the production of final goods and services produced by businesses:
Businesses adjust production to meet demand for goods and services, altering the level of economic activity. (measured by GDP)
put these flows in order
Flow — the $ value of incomes paid by businesses to households:
Flow — the $ value of all final goods and services (GDP) produced by businesses
Flow — the $ value of resources sold by households to businesses:
Flow — the $ value of spending or demand by households:
On a piece of paper, draw and label The 3 sector 4 flow circular model
see final ppt slide 3 for answer
what is the traditional viewpoint of consumers
Rationality & Self-Interest:
Ordered preferences:
Informed decision making:
Marginal benefits from consumption:
consumers: rationality & self interest
Consumers are motivated by self-interest
Carefully weigh up the expected costs and benefits of each and every decision with the objective of maximising utility.
Are not influenced by those around them and are never instinctive or impulsive when making a purchase.
consumers: ordered prefernces
Consumers are able to rank their preferences and make choices based on these rankings in order to maximise their utility.
There is an assumption that preferences will remain consistent over time.
consumers: informed decision making
Consumers have access to relevant and accurate information to make rational decisions.
consumers: marginal benefits from consumptions
Consumers are aware of the law of diminishing marginal utility and as such will be rational in consumption.
the law of diminishing marginal utility
The law of diminishing marginal utility: each additional unit of a good or service that is consumed generates less utility than the previous one. Therefore, total utility will grow less rapidly with each additional unit consumed.
How consumers might respond to government incentives and disincentives
Incentive: Encourages a desired behaviour or response.
The opposite is disincentive.
Governments intervene in markets by providing both
to encourage spending or saving in consumers.
why does the govt intervene
Lets Encourage spending!
= more demand for g&s
= more production needed
= more jobs/investments
= higher economic activity;
BUT over time
= higher selling prices due to shifts in demand
and/or supply shortage (from reaching/surpassing
productive capacity)
= demand or supply inflation
= reduced purchasing power + cost of living
increases
= reduced living standards
OK, So then let’s encourage saving!
= reduces demand
= reduces prices
= lower economic activity
BUT over time
= reduced need to produce
= reduces jobs
= unemployment
= unable to afford/meet needs/wants
= reduced living standards..
..and so on
Think of a car; government is the foot on the accelerator and brake, economic
growth is the speed. Balance and stability in economy is important.
govt: tax rebates/offsets + eg
Tax rebates/offsets: Think of them as discounts on the amount of tax you have to pay.
Eg; If you take on private health insurance (thus reducing dependency on public health system (medicare)), you don’t have to pay the medicare tax
Subsidies: Discounts or cash payments on
goods/services to make them more attractive;
the government pays the rest.
Eg; solar panels, medicines, LED globes etc
govt: subsidies
Indirect/Excise Taxes:
Laws/Regulations:
govt: indirect/excise taxes
These are taxes on goods and services the government want to discourage due to negative effects to consumers and society.
Eg; Taxes on alcohol, cigarettes, carbon tax, fuel.
govt: laws regulations
These make it illegal to
partake in certain goods/services like
underage drinking, not wearing bike helmets,
insider trading, etc
traditional viewpoint of businesses
Maximise Profits:
Minimise Production costs:
business: maximise profits
Using strategies to gain and retain customers through advertising, as well as addressing customer sovereignty through quality and pricing
business: minimise production costs
Using strategies to reduce costs such as where/how they use raw materials efficiently, reducing wages or reduce workforce through upskilling, purchase and use more efficient capital resources or innovation.
business: the exception
However, reputation/image (and it’s effect on sales);
the existence of non-profit organizations;
and the adoption of PPP (People, Planet, Profit)
challenge this traditional viewpoint
How businesses might respond to government incentives + egs
Tax rebates/offsets: Taxes are reduced on things like profits or goods/services needed to encourage more production or investment
Eg; Tax deductions on essential capital goods, interest from loans, costs of running a business, etc
Subsidies: Discounts or cash payments on resources
to make them more attractive to use or to produce
desired goods/services with (and sell for cheaper too);
the government pays the rest.
Eg; JobKeeper, fossil fuel industry, private schools, etc
The traditional economic viewpoint of the Government in the economy
Main goal: Maximisation of living standards:
Maintaining and maximising the quality of life for the nation.
Australia is a mixed economy. Its market runs freely but sometimes government needs to intervene to prevent instability and Market Failure, otherwise living standards
will fall.
the 3 goals of the govt
Three goals the Government focuses on is:
Economic stabilisation
Improving efficiency in resource allocation
Redistribution of income
govt: strat 1
economic stabilisation
There are 4 Phases of economic activity. If it is too unstable (too high/low and/or too quickly), living standards fall. The goal is to even it out.
During booms, governments cut spending and increase taxes to slow spending.
During recessions, governments increase spending and reduce taxes to encourage spending
govt: strat 2
improving efficiency in resource allocation
Government enacts laws that:
Promote more competition as it encourages reduced prices for customers, which encourages more efficient allocation and use of resources to maximise profits
Encourage more production of socially beneficial cheaper goods and services (and thus resource allocation) that ensure everyone can afford an acceptable level of living standards
Discourage production and consumption of harmful and undesired goods that lead to Market Failure
govt: strat 3
redistribution of income
Usually in a free market, what you earn is from the value of your contribution.
Although this seems fair, some people cannot work due to factors such as age, health, disability or disadvantage.
This creates inequality which can result in civil unrest, crime and over time greater societal divide of “haves” vs “have nots”
welfare benefits + egs
Government might implement a progressive income taxes system– where they tax higher income earners more and lower income earners less.
This provides more purchasing power to lower income
earners to afford and meet essential needs and wants
Government can also pay welfare benefits to further
support those in most need
Government can provide some services for free or
discounted, eg bulk billing/Medicare, low cost public
housing, school funding etc
How businesses might respond to government disincentives
Indirect/Excise Taxes: Taxes are imposed on the spending on certain goods and services the government want to discourage due to negative effects to consumers and society (eg fuel excise, carbon tax)
Company taxes on companies based on size, reduced for smaller companies to encourage competition and startups
Laws/Regulations: These make it illegal to
partake in certain behaviours like
anticompetitive behaviour, producing harmful
products, taking advantage of workers and
neglecting safety in the workplace
