Topic 2: Vaping

Question 1

The three main reasons a government may intervene in the market is to-

Answer 1

Stabilise the economy - usually through increasing or decreasing interest rates
Redistribute income - through taxes, pensions, benefits, allowances
Reallocate resources - refers to capital, land, labour and enterprise.

Question 2

The market may not produce enough socially desirable goods and services.

Answer 2

Such items include products related to health care, education, public housing and public transport.

Question 3

The government may intervene to provide goods that the private sector won’t supply.

Answer 3

These are services such as defence, public toilets and street lighting.

Question 4

The market may produce socially undesirable items.

Answer 4

The production or provision of vapes, illegal drugs, gambling, guns, alcohol, tobacco, fuel and pollution often has negative effects on families’ and communities’ living standards so the government tries to reallocate resources away from the production and provision of such goods and services.