1.4. Government intervention

Question 1

Minimum price

Answer 1

Price set by the government where the price isn’t allowed to fall below.
- Set above equilibrium price
- Creates a surplus

Question 2

Maximum price

Answer 2

Set by the government where the price isn’t allowed to rise
- Set below equilibrium price
- Creates a shortage

Question 3

EU ETS

Answer 3

EU Emissions Trading Systems
- Tries to prevent greenhouse gas emissions via pollution permits

Question 4

Command and Control

Answer 4

Govt identifies pollution targets and sets limits on how much companies can pollute.
Govt regulates companies and monitors whether they are sticking to the targets and fines them if not.

Question 5

Advantages of providing info to solve market failure

Answer 5

• Creates liberty to choose for consumers rather than banning
• Significant changes to societies habits than raising tax price

Question 6

Disadvantages of providing info to solve market failure

Answer 6

• Campaigns can be ignored
• Govt failure
• May not have significance short-run

Question 7

Government Failure

Answer 7

Intervention that results in net welfare loss
- The outcome of society is worse with the intervention compared to have been left to the free market.