Unit 4: Government Intervention Flashcards

1
Q

Name 3 reasons for government intervention

A

Correct market failure

Improve performance of UK economy

Address unacceptable situations e.g human rights violations

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2
Q

Name the 4 forms of gov interventions

A

Price controls

Regulation

Direct provision

Taxes and subsidies

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3
Q

Name an advantage and a disadvantage of minimum prices

A

Adv: Can plan investment and output

Disadv: Encourages overproduction

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4
Q

Name an advantage and a disadvantage of maximum prices

A

Adv: Allows lower incomes to afford product

Disadv: Shortages

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5
Q

Name 2 advantages and disadvantages of buffer stocks

A

Adv: Reduces instability, gives certainty to invest

Disadv: Expensive to maintain, optimum price floor hard to determine

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6
Q

Name an advantage and disadvantage of regulation as a form of gov intervention

A

Adv: Effective as most adhere to law

Disadv: Money to enforce, black markets

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7
Q

Name 2 advantages and 2 disadvantages of direct provision as a form of intervention

A

Adv: encourage merit goods, achieve ethical aims

Disadv: costly, inefficient as not subject to market forces

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8
Q

Name an advantage and disadvantages of indirect taxes

A

Adv: disincentive consumption

Disadv: how to choose optimum rate

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9
Q

Name an advantage and disadvantages of subsidies

A

adv: encourage supply and consumption

disadv: expensive, ineffective if inelastic

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10
Q

Define government failure

A

When government intervention leads to a net welfare loss

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11
Q

Name 6 causes of government failure

A

I nadequate information
C onflicting objectives
A dministrative cost
U nintended consequences
S elf interest
E xpertise

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12
Q

Name an example of government failure

A

£4bn spent on unusable PPE during COVID pandemic

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