examples of gov intervention correct MF Flashcards
give me 5
Plastic Packaging Tax (2022) – £202 a tonne on any packaging < 30% recycled
Vaping Products Duty (2026) - £2.20 per 10ml of e-liquid irrespective of strength
Energy Price Cap (OFGEM Cap) – used during Cost-of-Living Crisis
Subsidies for Green Transition (e.g., for Electric Vehicles and Heat Pumps)
Bus Fare Cap (2022-25) To make public transport affordable, the government implemented a bus fare cap, initially set at £2 and later increased to £3
Digital Services Tax (DST) - 2% tax on UK revenues of certain digital businesses
Help to Buy Scheme (2013–2023): Introduced to assist first-time buyers and those moving homes by providing equity loans and mortgage guarantees
Rental Housing Price Cap (Scotland) (2022-23) Rents initially capped and then allowed by rise by a maximum of 3% until September 2023
Minimum unit price for alcohol (Scotland) (2018-): Sets a baseline price per unit of alcohol – initially 50p per unit, increased to 65p per unit in September 2024.
Minimum wage (1999-) Raised by 6.7% in April 2025 to £12.21 per hour (adult)
reaons why scotland introduced min price unit alchohol
Externalities: When individuals consume alcohol excessively, it not only affects their own health and wellbeing but also imposes costs on society—such as increased healthcare expenditure- strain on NHS, reduced workplace productivity, and public disorder. External costs are not reflected in the market price of alcohol, leading to overconsumption from a socially optimal standpoint- therefore the min price should …… the external cost
Information failure: MUP can help overcome information failures, especially among young or vulnerable consumers who may underestimate the long-term health risks of excessive drinking- liver disease. Setting a price floor serves as a signal that reinforces the perception of alcohol as a potentially harmful product, like how taxes or regulations are used for tobacco.
evaluation of this policy - scotalnd
Regressive Impact on Low-Income Consumers: MUP is regressive—it disproportionately affects lower-income individuals, who spend a higher share of their income on alcohol. While MUP targets harmful drinking, not all low-income drinkers consume alcohol excessively.
hard to set correct price and calculate the effectove size of a minimum price- have imperfect info could lead to gov failure if set at wrong price e.g. black markets, unemployment
No Revenue Generation: MUP ( minimum unit price ) does not raise tax revenue for the government. The increased cost of alcohol goes to retailers and producers, not into public funds.
INELASTIC DEMAND
potential causes/ examples of gov failure for minimum unit pricing alcohol
Creation of a Black Market: Risk that MUP could encourage the emergence of illicit alcohol markets. This could result in unsafe, unregulated alcohol products entering the market, posing greater health risks than legal alcohol.
Enforcement and Compliance: The policy may suffer from weak enforcement. For example, people living near the England-Scotland border may buy alcohol in England, undermining the policy’s effectiveness.
unintended concequences- distortion of price signals- excess supply
asymmetric info - gov dont know much about alcohol market as they dont know what price will make people stop consuming alchol so a policy may not be effective.
what is the UK introducing in 2026 to do with vapes
tax on vaping products £2.20 per 10ml of e liquid
vaping creates costs to society which ARENT refelcted in the market price
external costs of vaping
- lithium damahing fisheries
- littering
- second hand smoke
- herd behaviour youn ger people prone to irrational behaviour
- electronic recycling- more filled landfill sights
- cost of enforcment and regulation e.g. checking illegal sales under 18
Waste: Disposable vapes are a growing source of environmental damage from plastic waste, risks from battery pollution). Local councils then incur extra clean-up and disposal costs which is then borne by local taxpayers or crowds out money for other services.
Educational Disruption: Rising vape use in schools has led to increased teacher time spent disciplining students and rest-room monitoring. This reduces overall learning time and affects the school environment, even for non-vaping students.
alternatives to taxes on disposable vapes effective loweing consumption/ changing peoples behaviour
behavioural nudges- info provision
-increased min age
-advertising - nictonine free
- nudges on packages show harmful effects
- reducing info gaps e.g. campaigns increased education
- banning falvours targetting younger children
Tighter Age Verification & Sales Restrictions: Such as stronger enforcement of age limits (18+), using ID checks and technology-based verification. Banning sales in convenience stores and sales from vending machines. Allow sales only through pharmacies
Packaging & Marketing Restrictions: Such as plain packaging laws (like those for cigarettes). Bans on colourful designs, celebrity endorsements, or youth-targeted branding.
diahram on word
evaluation
Here is a straightforward approach when revising and evaluating the impact of one or more forms of government intervention:
Effectiveness: Does the policy intervention work to achieve stated goals? And over what time frame does it work?
Efficiency: Does a policy help to achieve gains in allocative / productive and dynamic efficiency, reduce “X-inefficiencies”?
Equity: Is a policy equitable in the impact on different groups, communities, areas and so on – or does it lead to regressive effects?
Policies on their own are often ineffective – a mix of interventions affecting demand and supply-sides of a market might be needed
If interventions lead to a deeper market failure – this is government failure – be prepared to discuss this with all relevant exam questions
