1.4 - Government Intervention Flashcards
What type of tax creates a non-parallel shift to a supply curve
Ad valorem
What are disadvantages of subsidies (4)
Encourage laziness
Opportunity cost
Lower standard goods produced
Elasticity of demand determines effectiveness
What happens if a new maximum price is below equilibrium
More demand but a shortage of supply, excess demand
What happens if a new minimum price is above equilibrium
Less demand but increased supply, excess supply
What type of market structure do minimum prices work against
Monopsony power
What are minimum price cons (4)
Consumers pay more
Resources wasted when excess goods destroyed
Resources allocated inefficiently
High opportunity cost
Cons of regulation (3)
Expensive to monitor and enforce
Firms may face higher costs and close
Value judgement needed
Pros of deregulation (2)
Reduced government interference
Reduced bureaucracy increases efficiency
What type of firm needs regulation
Natural monopolies
What are causes of government failure (4)
Information gaps
Excessive admin costs
Unintended consequences of interventions
Distortion of price signals
What are NHS market failures (2)
Targets mean quality of care reduced
Lots of money is spent on admin rather than medical care
What are agricultural price supports market failures (2)
Overproduction of certain crops led to waste
Inefficient resource allocation
