Government microeconomic intervention
Topics covered in this Unit
All candidates study these AS Level topics
- Maximum and minimum prices
- Taxes (direct and indirect)
- Subsidies
- Transfer payments
- Direct provision of goods and services
- Nationalisation and privatisation
A Level candidates also study these additional topics
a) Policies to achieve efficient resource allocation and correct market failure
- application of indirect taxes and subsidies
- price and output decisions under nationalisation and privatisation
- prohibitions and licences
- property rights
- information
- regulatory bodies, deregulation and direct provision of goods and services
- pollution permits
- behavioural insights and ‘nudge’ theory
b) Equity and policies towards income and wealth redistribution
- equity versus efficiency
- price stabilisation
- means tested benefits
- transfer payments
- progressive income taxes, inheritance and capital taxes
- negative income tax
- poverty trap analysis
- Gini coefficient and the Lorenz curve
- inter-generational equity
c) Labour market forces and government intervention:
(i) demand for and supply of labour
(ii) wage determination in perfect markets
(iii) wage determination in imperfect markets
- factors affecting demand for labour
- derivation of individual firm’s demand for using marginal revenue product theory
- factors affecting supply for labour
- net advantages and the long-run supply of labour
- competitive product and factor market forces determining wage differentials, transfer earnings and economic rent
- influence of trades unions on wage determination
- influence of government on wage determination
- monopsony
d) Government failure in microeconomic intervention
- effectiveness of government policies
Revision Notes
Article Count:
25
Interactive Quizzes
Article Count:
0