Government Intervention and Failure (Edexcel A-Level Economics A): Flashcards
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Practise the cards
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Main purpose of govt intervention
Main purpose of govt intervention
Correct market failures
Market-based policy approach
Market-based policy approach
Works with market via incentives (taxes, subsidies)
Regulation approach
Regulation approach
Direct govt control via commands & rules
Indirect tax
Indirect tax
Tax on expenditure on goods/services
Effect of indirect tax on supply curve
Effect of indirect tax on supply curve
Shifts supply curve vertically upward by tax amount
Deadweight loss
Deadweight loss
Loss of total welfare not recovered by anyone
Polluter pays principle
Polluter pays principle
Firms causing pollution face full external costs
Tradable pollution permits
Tradable pollution permits
Govt sets cap, firms trade permits to pollute
Effect of minimum price
Effect of minimum price
Creates excess supply
Effect of rent control (max price)
Effect of rent control (max price)
Creates excess demand & shortage