Government Intervention Revision
25/1/23
Government Intervention
Government Intervention:An
Why
do
To
·
earn
To
·
governments
government
·
influence the
To
influence
To
correct
market
To
promote
equity
·
·
Price
Price
set
·
·
·
·
·
that
government
the
by
interferes
with the
market
economy.
revenue
level
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production
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failure
Price
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of
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equilibrium.
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welfart
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generates
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loss
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efficiency
allocative
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stakeholders
of
RWE Food price
=
control
SMSC
=
government
price
a
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below
set
price
income
of
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maximum
low
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level
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·
out
intervent?
households
To
·
carried
firms
support
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·
action
in
D =MSB
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Venezuela
⑦
Rent Control
Consequences
·
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·
market
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somea r e
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lower price
Producers
are
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price. Their total
·
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worse
falls after
workers
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price
ceiling
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to
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consume
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off. Those
worse
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product
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due
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and
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gain
or
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popularity
reduced
itat
off.
at
a
imposed.
increase.
does
worse
are
forced
and
and
lower
Government Intervention Revision
Price floor
Price
floor is
minimum
Consequences
Creation
·
equilibrium.
CS
black market
to
needs
1
eliminates allocative
·
·
·
Generates
loss
to
stakeholders
Consequences
P.
inefficiency
welfare
RWE Minimum Wage
Agriculture
-
-
-
-
·
Consumers
at
·
Producers
·
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money.
more
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market
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price.
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stakeholders
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=
welfare loss
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dispose surplus
firm inefficiency
·
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surplus
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surplus
of
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p
set
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of
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the
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set
price
government
a
of
will
less
iftheir
be
⑦
the
more
revenue
hired.
good
and
falls
receive
or
increases.
Government Intervention Revision
Indirect taxes
Indirecttaxes takes
=
indirectly
paid when purchasing
a
Sz=S, tax
D
expenditure
on
SMSC
S
good.
tax
RWE
taxes
=
alcohol
on
fossil fuels
on
PC
cigaret
on
-
.
Stake holders
pay
of
higher
a
the
are
a re
Government
is
-
the
and
consume
worse
receive
off
on
better
as
lower
off
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less
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the
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MSB
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thy
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workers
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revenue.
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shrant
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they
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collect
price
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good.
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sell
and
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is
causing
may
worse
as
off
unemploymentto
getlived.
the
market has
increase.
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SMSC
Some
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As
Government Intervention Revision
Subsidies
Subsidies:
a re
per
the
payments
unit
of
output
the
the
by
that
government
lower
production
cost
and
increas
market.
S,
P
RWE Electric cars
Green
energy
=
MSC
=
rCS
Gas
Schools
in
Fiji
p.
Stakeholders
Pe
they
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butter
buy
can
Consumers
they
are
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are
better
more
get
less.
off
money
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sub
+
govost
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=
as
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more
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welfare
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as
and
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off
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Consumers
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the
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employment.
worse
implimented
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they
the
pay
themselves
fax
better
off
as
the
tax
and
market
but
course
has
could also
gain
increased
be
batter
popularity
and
also
increased