key words

Question 1

direct taxation

Answer 1

this includes income tax, corporation tax and NI contributions. you have to pay these regardless

Question 2

indirect taxation

Answer 2

this includes VAT, excise duty, council tax and business rates which vary locally. because you choose how much you shop these taxes affect different individuals to different extents

Question 3

polluter pays principle

Answer 3

any measure such as a green tax, whereby the company/ organisation responsible for causing the pollution explicitly pays for it

Question 4

tradable permits

Answer 4

a permit that allows the owner to emit a certain amount of pollution and that if unused can be sold to another polluter.

Question 5

nudging

Answer 5

this means trying to get consumers / firms to change their behaviour without using laws, taxes or subsidies

Question 6

regulation

Answer 6

means laying down rules (in law) that require certain behaviours or restrict freedom of action to make economic decisions

Question 7

price ceilings

Answer 7

is setting a maximum legal price for a good

Question 8

price floor

Answer 8

is a legal minimum price of a good that can be set

Question 9

black market

Answer 9

is defined as economic activities, enterprises and workers that are not regulated or protected by the state and may be acting contrary to regulations

Question 10

secondary market

Answer 10

is a market that emerges alongside a primary market that is not working properly

Question 11

price controls

Answer 11

is when the government set maximum or minimum prices for a good or service

Question 12

state provision

Answer 12

is when the government supplies goods and services such as education, health and housing

Question 13

government failure

Answer 13

occurs when government intervention in markets leads to a net welfare loss in comparison to the free market operating alone

Question 14

provision of information

Answer 14

ensures that economic units can maximise decisions when consuming and producing goods and services

Question 15

the law of unintended consequences

Answer 15

means that unexpected events occur due to the government intervention

Question 16

market failure

Answer 16

is when the price mechanism leads to an inefficient allocation of resources and a dead weight of economic welfare

Question 17

economies of scale

Answer 17

firms benefit from producing in large amounts because average costs decreases