3.2 Methods and effects of government intervention in markets

a) With the help of a demand and supply diagram, explain how the introduction of an effective maximum price affects the equilibrium in the market for a good and consider the extent to which a maximum price benefits all consumers of the good.

a) With the help of a diagram, explain how changes in a subsidy can influence the price and quantity sold of a product in a market and consider how expenditure on a subsidy is affected by the price elasticity of demand for the product. [8]

b) Assess whether an increase in the tax on a demerit good is always the best way to reduce the consumption of such a product. [12]

a) Explain three reasons, associated with costs of production, why the supply curve for a particular market may shift to the right and consider the extent to which government microeconomic policy may also shift the supply curve for a particular market to the right. [8]

b) Assess whether a charge made for healthcare at the point of use is likely to be more beneficial to consumers and providers than if healthcare is available to all free of charge. [12]

b) Assess whether governments should always support the provision of merit goods in markets such as those for education or health care. [12]

a) With the help of a diagram, explain the impact of introducing an effective minimum price for a product and consider the effect on the consumer surplus for that product. [8]

b) Assess whether a minimum wage policy is the best way to redistribute income in an economy. [12]

b) Assess the extent to which a subsidy is likely to be the best method to increase the consumption of a merit good. [12]

b) Assess whether the expected benefits of providing healthcare services free of charge at the point of use exceed the likely costs. [12]

a) With the help of an example each, explain the difference between a merit goods and a demerit goods and consider whether a subsidy given to a merit good will always be effective in increasing consumption. [8]

b) Assess whether fixing a minimum price is likely to be the best policy to reduce the consumption of a demerit good. [12]

a) With the help of a demand and supply diagram, explain how the introduction of an indirect tax affects equilibrium in a market and consider the extent to which the incidence of the tax will fall on the consumer. [8]

b) Assess whether the improved provision of information is likely to be the best method to reduce the consumption of demerit goods. [12]

a) Explain why a government might decide to increase its direct provision of essential goods and services and consider whether such a policy is always likely to be successful. [8]

b) Governments sometimes fix maximum prices on goods for different reasons. Assess whether the use of a maximum price is always advantageous. [12]

a) Explain why the provision of bus and local rail (mass transit) services in cities is classified as a private good not a public good and consider why such services might only be provided by the private sector. [8]

b) Assess whether bus and local rail systems in cities should receive substantial subsidies from governments. [12]

a) Assess whether maximum price or transfer payments are more effective to reduce price of food items. [12]

b) With the help of a diagram, assess whether the introduction of a minimum price in a market can be justified. [12]

b) Discuss the extent to which the introduction of a maximum price in a market will benefit consumers. [12]