Section 6 - Government Intervention Flashcards
Indirect tax
Imposed on the purchase of goods or services
Specific tax
A fixed amount that’s charged per unit of a particular good
Ad Valorem Tax
Charged as a proportion of the price of a good
Subsidy (positive externality)
encourage the production and consumption of goods and services with positive externalities
Subsidy (negative externality)
Encourage the purchase and use of goods/services which reduce negative externalities
Subsidy
Paid to producers by the government
Maximum price (Price ceiling)
Set to increase consumption of a merit good or to make a necessity more affordable
Minimum price (Price floors)
Set to make sure that suppliers get a fair price
State provision (gov expenditure)
Where the government provides certain good or services
Privatisation
The transfer of the ownership of a firm/industry from the public sector to the private sector
Competitive tendering
Private firms bid (or compete) to gain a contract to provide a service for the government
Public Private Partnerships (PPPs)
A private firm works with a government to build something or provide a service for the public
Regulations
Rules that are enforced by an authority and they’re usually backed up with legislation
Legislation
Legal action can be taken against those that break the rules
Deregulation
Removing or reducing regulations
Competition Policy
Applying rules to make sure businesses and companies compete fairly with each other
Competition and Markets Authority (CMA)
Monitor competition to look out for unfair monopolistic behaviour
Regulatory bodies
Regulate specific markets and are responsible for regulating prices, monitoring safety and product standards, and encouraging competition.
Payment Protection Insurance (PPI)
Insurance that’s used to repay debt should the borrower be unable to do so
Roaming Charges
Charges for data usage, calls or texts, made or received, when abroad
Cost benefit analysis
Considering the total costs and benefits of a major project
Government intervention
the actions taken by the government to influence the market and regulate economic activity
Government failure
When government intervention causes a misallocation of resources in a market
Regulatory capture
firms covered by regulatory bodies, influence the decisions of the regulator to ensure that the outcomes favour the companies and not the consumers
