Why Governments Intervene (HSC SSCE Economics): Flashcards
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Practise the cards
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Laissez-faire meaning
Laissez-faire meaning
Economy where markets operate without govt interference
3 objectives of govt intervention
3 objectives of govt intervention
Better resources, equitable income, economic stability
Market failure definition
Market failure definition
Market forces produce unfavorable or inefficient outcomes
PIEMS acronym (5 market failures)
PIEMS acronym (5 market failures)
Provision, Income, Externalities, Market power, Stability
Markets respond to these interests
Markets respond to these interests
Private economic interests, not social interests
Resource allocation definition
Resource allocation definition
How society's scarce resources are distributed among uses
Risk of too much govt intervention
Risk of too much govt intervention
Stifles innovation, reduces efficiency, hampers growth
Risk of too little govt intervention
Risk of too little govt intervention
Instability, inequality, inadequate essential facilities
What markets excel at determining
What markets excel at determining
Which goods, quantities, how to organize production
Externalities as market failure
Externalities as market failure
Costs/benefits for third parties not in the transaction