Government Intervention in Markets Flashcards Preview

AQA AS Micro-Economics > Government Intervention in Markets > Flashcards

Flashcards in Government Intervention in Markets Deck (10)
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1
Q

Government information

A

Campaigns and sources of information used in order to correct a market failure and/or influence consumer behaviour. An example would be the ‘Don’t drink and drive’ campaigns.

2
Q

Maximum price

A

A legally imposed maximum price in a market that suppliers cannot exceed - in an attempt to prevent the market price from rising above a certain level. To be effective a maximum price has to be set below the free market price.

3
Q

Minimum price

A

A legally imposed price floor below which the normal market price cannot fall. To be effective the minimum price has to be set above the normal equilibrium price.

4
Q

Polluter pays principle

A

The government may choose to intervene in a market to ensure that the firms and consumers who create negative externalities include them when making their decisions e.g. first parties are forced to internalise external costs & benefits through indirect taxes.

5
Q

Pollution permits

A

Permits allocated in an emissions trading system, for example each permit in the EU trading scheme allows a business to pollute 1 tonne of CO2.

6
Q

Price ceiling

A

A price ceiling is a regulated maximum price in a market – sellers cannot legally offer the product for sale at a price higher than the ceiling. To be effective, a ceiling must be set below the normal free market equilibrium price.

7
Q

Price floor

A

A price floor is a minimum price for example a minimum wage in the labour market. Sellers cannot legally under-cut the price floor.

8
Q

Regulated prices

A

Not all prices are set by the free-market forces of supply and demand. In Britain, a number of prices are affected by regulators who may impose a pricing formula on suppliers. Good examples are rail fares, the cost of postage stamps and water bills.

9
Q

Regulation

A

Government rules and laws that can control the behaviour of producers or consumers in a market.

10
Q

State provision

A

Government-provided good or services - funded through tax revenue to provide goods which have positive externalities or are public goods.