2.11 Government Intervention (INFORMATION PROVISION)

Question 1

define provision of information

Answer 1

ensures that economic units can maximise decisions when consuming and providing goods and services

seeks to redress the problems caused by a lack of information

Question 2

when will the government provide information

Answer 2

when the private sector fails to do so

Question 3

what areas do the government provide information in

Answer 3

• the job market
• dangerous products e.g cigs
• economic data to help firms plan for the future

Question 4

what are the positive impacts of information provision

Answer 4

• reduces negative externalities
• increases positive externalities
• higher educates people
• Encourages informed decision-making
• Low-cost compared to other interventions
• Preserves consumer freedom
• Can lead to behavioural change over time

Question 5

what are the potential issues with this form of govt intervention

Answer 5

• may not work for all markets with addictive goods such as drugs.
• it is costly for the government, potentially leading to opportunity costs
• People may ignore the information
• Behavioural change can be slow
• Costly to provide and maintain accurate information
• May be ineffective for deeply ingrained habits (e.g. smoking)

Question 6

What is information provision?

Answer 6

Information provision is when the government provides information to help consumers and producers make more informed decisions, aiming to correct information failure.

Question 7

What is information failure?

Answer 7

Information failure occurs when one party in a transaction has more or better information than the other, leading to misallocation of resources.

Question 8

What are examples of government information provision?

Answer 8

Health warnings on cigarettes and alcohol

Calorie labelling on menus

Financial product information (e.g. pensions)

Food hygiene ratings

Question 9

What type of market failure does information provision address?

Answer 9

It tackles asymmetric information, where consumers or producers lack the knowledge to make rational choices.

Question 10

How does information provision avoid unintended consequences?

Answer 10

It is a non-intrusive method that doesn’t distort prices or create black markets — reducing the risk of government failure.

Question 11

How can information provision be made more effective?

Answer 11

Use of nudges and behavioural insights

Ensure clear, accessible messaging

Combine with other policies (e.g. taxes or regulations)