Government Intervention in Markets (AQA A-Level Economics): Flashcards
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Practise the cards
10 cards from this deck
Pro-free market economists' belief about markets
Pro-free market economists' belief about markets
Market forces naturally produce best outcomes
Interventionist economists' view on markets
Interventionist economists' view on markets
Often uncompetitive, prone to market failures
Free-rider problem consequence
Free-rider problem consequence
Markets may fail to provide pure public goods
Polluter must pay principle
Polluter must pay principle
Tax imposed equal to money value of negative externality
Tax effectiveness when demand is elastic
Tax effectiveness when demand is elastic
Effective in reducing demand for the product
Tax effectiveness when demand is inelastic
Tax effectiveness when demand is inelastic
Raises revenue but may not significantly reduce consumption
Price ceiling definition
Price ceiling definition
Price above which it is illegal to trade
Effect of price ceiling set below equilibrium
Effect of price ceiling set below equilibrium
Creates excess demand
Price floor definition
Price floor definition
Price below which it is illegal to trade
Effect of price floor set above equilibrium
Effect of price floor set above equilibrium
Creates excess supply