Real World Examples

Question 1

price ceiling

Answer 1

• Hungary and essential goods (potatoes, milk, sugar) to guarantee lower prices for consumers struggling with inflation– shortage, limit how much shoppers could buy, prices of substitutes rose

Question 2

price floor

Answer 2

• Scotland and alcohol minimum unit pricing to solve the problem of cheap high-strength drinks and health problems deriving from overconsumption– 5% reduction sales of alcohol, 13.4% reduction in deaths caused by overconsumption

Question 3

subsidies

Answer 3

USA subsidies on crops (corn, soy and wheat) to make sure domestic farmers stay in business

– lower prices, higher revenues, since NAFTA (North American Free Trade Agreement) in 1994 subsidised crops were exported to Mexico, putting Mexican farmers out of business and leaving them impoverished

Question 4

indirect taxes

Answer 4

Norway high indirect taxes on alcohol to discourage overconsumption

– over the years reduced social costs, but many Norwegians override the excise tax by buying in neighbouring Sweden where taxes are lower

Question 5

indirect taxes- sugar tax

Answer 5

UK 2018, to protect children from excessive sugar consumption ans child obesity; targeted at manufacturers to reduce sugar content of soft drinks

– government revenue, child obesity cases reduced, sugar content reduces, soft drinks more expensive

Question 6

carbon tax

Answer 6

France, from 10 years ago, reduced CO2 emissions by 5 percent in 2014-2018; to reduce emissions from heating and transport

– government revenues, v high (highest in Europe)

Question 7

common pool resources

Answer 7

fishing catch limits in EU- European Union Council of Fisheries Ministers meets once a year to decide the limits, set up as quotas on countries; to prevent overexploitation of fisheries and depletion of common pool resources