government microeconomic intervention Flashcards
reasons for government intervention in markets, methods and effects of government intervention in markets, addressing income and wealth inequality, (25 cards)
market failure
when the free market does not make the best use of scarce resources
incidence
the extent to which the gas burden in borne by the producer or consumer or both
maximum price
a price that is fixed; the market price must not exceed this price; sometimes called a price ceiling
minimum price
a price that is fixed; the market price must not go below this price; sometimes called a price floor
incidence burden depends on
price elasticity of demand as a product is more elastic there is a bigger burden on producers as less people will buy if price increases if product is inelastic the burden is more on consumers as they will still buy the product at any price
buffer stock scheme
a type of commodity agreement designed to limit price fluctuations
wealth
a stock of assets that has been built up over time
gini coefficent
a numerical measure of income inequality
informal economy
the part of the economy that is not regulated, protected or taxed by the government
minimum wage
the least amount an employer can legally pay one of its workers; it is usually expressed as wage rate per hour
transfer payement
a payment made by the government to certain members of the community who may be unable to work or are in need of assistance
progressive tax
one where the rate of taxation rises more than proportionally to the rise in income
inheritance tax
a progressive tax on a inheritance or gift
capital tax
a progressive tax pain annually on the difference between buying and selling price of an asset
the role of government and the issues of equality
a consequence of market failure is that government intervention can take various forms in order to produce greater social equality and equity
reasons for market failure
Externalities
Public Goods
Imperfect Information
Monopoly Power
Factor Immobility
Inequality
Short-Termism
Failure to Provide Merit Goods
Overprovision of Demerit Goods
why is there an over consumption of demerit goods
information failure
why is there an underconsumption or merit goods
information failure
AD valorem tax
takes a % of the price charged by retailer, GST
specific tax
eg fuel tax amount per unit, final price includes tax
subsidy
A subsidy is money given by the government to help lower the cost of producing or buying something.
example of maximum price
essentials
example of minimum price
demerit goods, crops they can help increase national production as imports aren’t cheaper anymore
increasing wage impacts
Higher Consumer Spending
Increased Business Costs
Potential Job Losses
Improved Living Standards
Reduced Poverty and Inequality
Incentive to Work
Possible Inflation
Productivity Improvements
Impact on Competitiveness
Automation and Reduced Labour Demand
