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Lecture notes 4.3.3 Policies to deal with market failure £7.49
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  2.  
  3. PEARSON (PEARSON)
  4.  
  5. Economics B
  6.  
  7. Unit 4 - Making markets work

Lecture notes

Lecture notes 4.3.3 Policies to deal with market failure
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These notes helped me get an A* in A Level Economics, covering all aspects of the specification, plus hints of real world context.

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  • June 15, 2023
  • 4
  • 2022/2023
  • Lecture notes
  • Paddingtion zinzombe
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  • 411 spectrum of competition 412 barriers to e

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4.3.3 Policies to deal with market failure

 Provision of public & merit goods, indirect taxation of demerit goods, tradable pollution permits,
provision of information, legislation, and regulation
 Government can intervene to correct market failure

Indirect Tax

 Tax on expenditure
 They increase production costs, so producers supply less
 Increases market price
 Used to discourage production & consumption
 Decreases demand
 If tax = to external cost supply curve becomes MSC rather than MPC
 Ad valorem tax
o Percentages such as VAT
o Customers may have to pay the tax making products more expensive
o Producers may have to pay the tax increasing their cost of production
o Tax could be split between both of the parties involved
o Affects the supply & demand of products
o Depends on the PED
o Inelastic products consumers pay tax
 Discourages them from buying demerit goods




o
 Specific tax
o Charged per item
 58p per liter for fuel
o The more inelastic the demand the higher tax burden for consumer
o Lower burden for the producer
o

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