Unit 2.7 - Role of Government in Microeconomics [Government Intervention]
What you need to know and understand:
Key concepts:
Concepts to understand:
- Reasons for government intervention in markets
- Influencing market outcomes in order to:
- earn government revenue
- support firms
- support households on low incomes
- influence level of production
- influence the level of consumption
- correct market failure
- promote equity.
- Influencing market outcomes in order to:
- Main forms of government intervention in markets
- Price controls: price ceilings (maximum prices) and price floors (minimum prices)
- Indirect taxes and subsidies
- Direct provision of services
- Command and control regulation and legislation
- Consumer nudges [HL only]
- Government intervention in markets—consequences for markets and stakeholders
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- The market mechanism may result in socially undesirable outcomes that do not achieve efficiency, environmental sustainability and/or equity.
- Market failure, resulting in allocative inefficiency and welfare loss.
- Resource overuse, resulting in challenges to environmental sustainability.
- Inequity, resulting in inequalities.
- Governments have policy tools which can affect market outcomes, and government intervention is effective, to varying degrees, in different real-world markets.
TEXTBOOK unit 2.7
|
|