Topic 2: Vaping

Question 1

Three main reasons the government may intervene in the market.

Answer 1

Stabilise The Economy - Usually through increasing or decreasing interest rates.

Redistribute Income - Through taxes, pensions, benefits and allowances.

Reallocate Resources - An adequate supply of goods and services. The private sector may underproduce these goods because they are expensive and it is difficult to make a profit from them.

Question 2

Three reasons why the government may need to intervene in the economy to reallocate resources.

Answer 2

The market may not produce enough socially desirable goods and services such as health care.

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

The market may produce socially undesirable items such as vapes.