government intervention

Question 1

Factor immobility-Structural unemployment

Answer 1

State investment in education and training

Question 2

Public goods-Failure of market to provide pure public goods, free rider problem

Answer 2

Government funded public goods for collective consumption

Question 3

Demerit goods-Over consumption of products with negative externalities

Answer 3

Information campaigns, minimum age for consumption

Question 4

Merit goods-Under consumption of products with positive externalities

Answer 4

Subsidies, information on private benefits

Question 5

Imperfect information-Damaging consequences for consumers from poor choices

Answer 5

Statutory information / labelling

Question 6

High relative poverty-Low income families suffer social exclusion, negative externalities

Answer 6

Taxation and welfare to redistribute income and wealth

Question 7

Monopoly power in a market-Higher prices for consumers causes loss of allocative efficiency

Answer 7

Competition policy, measures to encourage new firms into a market- ◦Strong laws and penalties against proven cases of price fixing or collusion that involves market sharing

Question 8

fluctuating prices

Answer 8

buffer stock scheme- sell stocks on to the market when supply is low, buy stocks when supply is high