market failure

Question 1

negative externalities of smoking

Answer 1

rise in vaping in young people - bad for their health and strain on the NHS (2nd hand smoking)
disposables are bad for the environment - being banned in the uk on the 1st June
calls for cigarettes to be banned
reduced productivity as they take smoking breaks - economic losses for the uk
fiscal costs - more spending on healthcare, reduced tax revenue due to early deaths and lower productivity

Question 2

water companies

Answer 2

thames water who have debts of £19bn dumped raw sewage into rivers, lakes and oceans for 300,000 hours in 2024 alone, a 50% increase from 2023 which is an environmental market failure

Question 3

carbon tax in the uk pros

Answer 3

climate change is a global market failure
have our own trading emission scheme after leaving the eu
pros - incentive to reduce emissions
funds green initiatives from tax revenue
provides price certainty - it’s easier to predict a price so businesses can then budget
can be easier to administrate than cap systems
can vary for specific sectors

Question 4

cons of the uk carbon tax

Answer 4

regressive impact - could disproportionately affect low income households
if the tax rate isn’t high enough it won’t be significant enough to reduce emissions
negative impacts on competitiveness
businesses might relocate to countries with lower carbon taxes
could result in political opposition due to household budgets and business costs

Question 6

minimum price of alcohol in Scotland has increased

Answer 6

was necessary to reduce alcohol related harm and improve public health
pros of this - reduced consumption
targeted at high risk drinkers
reduced health inequalities

Question 7

cons of increase in minimum price of alcohol

Answer 7

only had a limited impact for those dependent on it
financial strain for those who are dependent
unsure on long term impacts

Question 8

negative externalities of gambling

Answer 8

£3.616 billion was spent on betting and gambling in the 2024-25 financial year
economic activity has reduced by £1.3 billion and wages by £2.6 billion

Question 9

fat tax

Answer 9

obesity is a form of market failure
tax on junk food to reduce childhood obesity
food prices have increased in the last 2 years
some can’t afford to eat so implement policies for more free school meals or introduce more food banks

Question 10

childcare positive externalities

Answer 10

means mothers can still work too
better development from a younger age
less likely to be anti social
more economic growth as mums are working too