Unit 4: Government Intervention Flashcards
Name 3 reasons for government intervention
Correct market failure
Improve performance of UK economy
Address unacceptable situations e.g human rights violations
Name the 4 forms of gov interventions
Price controls
Regulation
Direct provision
Taxes and subsidies
Name an advantage and a disadvantage of minimum prices
Adv: Can plan investment and output
Disadv: Encourages overproduction
Name an advantage and a disadvantage of maximum prices
Adv: Allows lower incomes to afford product
Disadv: Shortages
Name 2 advantages and disadvantages of buffer stocks
Adv: Reduces instability, gives certainty to invest
Disadv: Expensive to maintain, optimum price floor hard to determine
Name an advantage and disadvantage of regulation as a form of gov intervention
Adv: Effective as most adhere to law
Disadv: Money to enforce, black markets
Name 2 advantages and 2 disadvantages of direct provision as a form of intervention
Adv: encourage merit goods, achieve ethical aims
Disadv: costly, inefficient as not subject to market forces
Name an advantage and disadvantages of indirect taxes
Adv: disincentive consumption
Disadv: how to choose optimum rate
Name an advantage and disadvantages of subsidies
adv: encourage supply and consumption
disadv: expensive, ineffective if inelastic
Define government failure
When government intervention leads to a net welfare loss
Name 6 causes of government failure
I nadequate information
C onflicting objectives
A dministrative cost
U nintended consequences
S elf interest
E xpertise
Name an example of government failure
£4bn spent on unusable PPE during COVID pandemic