Micro Economics - Role of the Government

Question 1

why do governments influence market objectives (7)

Answer 1

earn revenue, support firms, support households of low incomes, influence level of production, influence level of consumption, correct market failure, promote equality

Question 2

Price ceiling (and real world uses)

Answer 2

used to set a maximum price below the equilibrium price

example: food price controls

Question 3

Price Floors (and real world uses)

Answer 3

used to set a minimum price above the equilibrium price

example: raise incomes for producers of products that government deems important

Question 4

Indirect taxes

Answer 4

imposed on spending to buy goods and services. they are paid partly by consumers, but are paid to the government by producers

Question 5

subsidies (why do govts do this?)

Answer 5

financial assistance from the government to firms. to increase producer revenue, make goods available to low income consumers, encourage production of merit goods, improve allocation of resources, ect

Question 6

direct provision of services

Answer 6

when the government directly provides goods and services deemed to be in the best interest of the public. not necessarily free but is usually well below market price (healthcare, education)

Question 7

command and control regulation and legislation

Answer 7

direct rules or laws governing an activity or industry, stating what is permitted and what is illegal. e.g. 2020 UK banned credit cards to place bets in an attempt to reduce the problem of Gamblin online

Question 8

consumer nudges

Answer 8

influencing the choices that people make by using small promos or tweaks to alter social and economic behaviour, without taking away the power for the people to choose