Gov solution for incompete Info Flashcards
(1) How does the government intervene to solve under consumption of positive externality goods caused by information gaps ?
They will introduce regulations. For example, for education the gov has made it a legal requirement for children to go to school all the way to 18.
(1) What is the 2nd way government can intervene to solve under consumption caused by information gaps ?
They provide information on the benefits of education like advertising or festivals on subjects or career options
(1) What is the 3rd way government can intervene to solve under consumption of goods caused by gaps ?
The government can subsidise goods. For example for education they will subsidise university degrees encourage consumption. Prices of university of degrees will go down as it is being subsidised by the government
What are other examples of gov intervention when solving under consumption of goods caused by information gaps
For instance, consumers may under-consume healthy food as of incomplete information creating a market failure and so government can create regulations like making it a legal requirement to take part in PE. School cafeteria should also provide healthy school meals. They can also advertise healthy food like the 5 a day fruit and veg campaign. Finally they subsidise to farmers of fruit and veg to increase consumption.
(2) What is one way government can intervene to solve the overconsumption of harmful products caused by information gaps ?
Regulations. For example for cigarettes government legally require cigarette companies to put labels on their packets such as smoking kills. They made it illegal to smoke in public areas and banning TV adverts on cigarettes.
(2) What is the 2nd way government can intervene to solve over consumption of harmful goods caused by gaps ?
Advertising. For smoking, the gov will provide info directly to consumers about the consequences of our health when we smoke cigarettes
(2) What is the 3rd way government can intervene to solve the overconsumption of harmful products caused by information gaps ?
Specific tax. This will shift supply vertically upwards increasing price and reducing quantity.
What are other examples of gov intervention when solving over consumption of harmful goods caused by information gaps ?
For example, with harmful drugs government have set regulation making drugs illegal. You can only buy alcohol if you’re 18 or above. They will also provide information like adverts against drink driving. Finally, the government will introduce specific taxes on alcohol which increases prices and decreases consumption
