Information Provision - Leftwards Shift in Demand

Question 1

Diagram Information Provision Demand

Answer 1

Question 2

Diagram analysis

Answer 2

• Decreases consumption of a product (D1 - D2)
• Causes surplus supply in market.
• Quantity decreses
• New equilibrium
• Solves problem of overconsumption of X. Corrects failure. Fixes info failure. Market more allocatively efficient.
• Reduces welfare loss.

Question 3

Advantages of Information Provision

Answer 3

• raises awareness
• Education / information may change attitudes
• Promotes behaviour which generates positive externalities

Question 4

Disadvantages of Information Provision

Answer 4

• Expensive to produce adverts
• Effects will not take place immediately
• No revenue
• May not impact goods
• Businesses / person may ignore the message.
• Not always clear what information should be provided.