Lesson 19 - Government Intervention Flashcards
1
Q
what are indirect taxes?
A
taxes on goods or services
2
Q
what are the two ways that indirect taxes can be imposed? (explain them)
A
ad valorem = amount of tax paid rises as the price rises (percentage of price)
specific tax = tax paid per unit stays the same
3
Q
what are some ways that governments can discourage the consumption of demerit goods?
A
- banning them
- taxation
- advertisement
4
Q
what are some issues associated with indirect taxes?
A
- they drive up the prices of things that consumers want
- type of government failure of they overestimate how much to tax by
- the government can use it as a tool to increase revenues
5
Q
what are some ways that governments can encourage the consumption of merit goods?
A
- subsidies
- make it a legal requirement (education)
- information campaigns
6
Q
what is nationalisation?
A
- when privately owned industries are now owned and controlled by the government
7
Q
how is regulation being used to deal with pollution?
A
- pollution permits
- taxation
- congestion charge
8
Q
how can price controls be used to prevent market power from being abused?
A
- price floors
- price ceilings
