government intervention and failure Flashcards
how can governments intervene
Subsidy
Tax
Regulations
Information
Pollution permits
State provision
what is government failure
when government intervention leads to a worsening of resource allocation (costs of a policy outweighs the benefits)
why does government failure happen
Inadequate information
Cost
(financial/opportunity)
Administrative errors
Unintended consequences
Self interest
Expertise (lack of)
how does a maximum price work
-draw
decreases price levels
-> excess demand
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how does a minimum price work
increases price levels
->excess supply
used on demerit goods