A2.04.01: The reasons for gov. intervent. in markets

Question 1

List 7 reasons why governments intervene in markets

Answer 1

• To earn gov. revenue
• To support firms
• To support households on low incomes
• To influence level of production
• To influence the level of consumption
• To correct market failure
• To promote equity

Question 2

List 7 microeconomic policy tools

Answer 2

• Indirect Taxes
• Subsidies
• Legislation / Regulations
• Providing info / Persuading firms and consumers to change behaviour (Nudges)
• Maximum prices (Price Ceilings)
• Minimum prices (Price Floors)
• Tradable Permits