Government intervention Flashcards
What is a buffer stock scheme ?
Introduction of both a max and min price in the market to prevent large fluctuations
What is Competition policy ?
Government action to increase competition in markets
What is government failure ?
When government intervention leads to a net welfare loss in society
What is an indirect tax ?
Tax in expenditure which increases production costs and leads to a fall in supply
What is information provision ?
Government intervention of info to correct market failure
Public / private partnership is ….
When the govt and private sector work together on projects
Regulation is …
Laws to address market failure and promote competition between firms
Subsidy is ..
Govt payments to a producer to lower costs and encourage them to produce more
Tradable pollution limits are …
Licences which allow businesses to pollute up to a certain amount
What are the two types of indirect taxes
add valorem such as VAT and specific taxes like fuel duty
What are the advantages of govt intervention?
Easier to coordinate resources, inequality in society could be reduced and the abuse of monopoly could be prevented
Disadvantages of govt intervention are …
Limits democracy and personal freedom, may not meet consumer preferences and they fail
1 Cause of government failure is …
Distortion of price signals for example subsiding a failing industry
2nd cause of government failure is …
Unintended consequences a policy could be undermined which could make them expensive
3rd cause of government failure is …
Excessive admin costs social benefits may not be worth the cost
4th cause of government failure is …
info gaps, some policies maybe decided without perfect information and fail
