Microeconomics Topic 5 YR2 Flashcards
(16 cards)
What are examples of public goods?
National defense and street lighting.
What is information failure?
Information failure occurs when consumers or producers lack perfect knowledge, leading to suboptimal decisions.
What is an example of information failure?
Complex financial products that consumers do not fully understand.
What is government intervention?
Actions taken by the government to correct market failures and improve social welfare.
What are the main objectives of government intervention?
To promote economic efficiency, equity, provision of essential goods, correction of externalities, and economic stability.
What is taxation?
Taxation is a financial charge imposed on income, profits, or goods to influence behavior or raise revenue.
What is an example of an indirect tax used to address market failure?
The UK sugar tax, which aims to reduce sugary drink consumption.
What are direct taxes?
Taxes levied on income, profits, or wealth, such as income tax and corporation tax.
What is an example of a subsidy?
Grants for renewable energy, such as solar panel installation.
What is an example of regulation addressing externalities?
Banning smoking in public places.
What is the opportunity cost of government intervention?
The cost of forgoing the next best alternative use of resources when funds are allocated to one area.
What are key diagrams used to evaluate government intervention?
Taxation, subsidies, price controls, externalities, and public goods diagrams.
What are the criteria for evaluating government intervention?
Effectiveness, efficiency, equity, long-term vs short-term impacts, unintended consequences, and opportunity cost.
What is an example of a successful government intervention?
Congestion charges in London, which reduced traffic and emissions.
What are unintended consequences of price controls?
Black markets or reduced supply of the controlled goods.
What are the causes of government failure?
Imperfect information, administrative costs, and unintended consequences.
