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Summary Edexcel A-Level Economics, Theme 1: Government Intervention and Failure - Subsidies, Price Controls, Regulations $3.98   Add to cart
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Summary Edexcel A-Level Economics, Theme 1: Government Intervention and Failure - Subsidies, Price Controls, Regulations
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  • Course
  • Theme 1: Govt Intervention and Failure
  • Institution
  • PEARSON (PEARSON)

A summary of: - Subsidies with diagrams - Maximum and minimum prices - Regulations With pros and cons for all

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Document information

  • June 25, 2022
  • 7
  • 2021/2022
  • Summary

Subjects

  • edexcel a level economics
  • a level economics
  • microeconomics
  • government intervention
  • subsidies
  • price controls
  • regulation

Written for

  • A/AS Level
  • PEARSON (PEARSON)
  • Economics
  • Theme 1: Govt Intervention and Failure
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MICROECONOMI

SUBSIDIES, MAX/
PRIC
REGULATIO

, SUBSIDIES
• Utilised for goods with positive externalities
in consumption by lowering costs for
producers (and therefore lowering prices).
• MSB > MPB as there are external benefits for
consuming the good.
• Product is under-produced and under-
consumed because the MEB (shown by ac) is
not included in  ungained welfare of area abc
i.e. allocative inefficiency.
To achieve SOE
• Subsidy needs to equal bd (represents MEB at
SOE).
• d: max price consumers are willing to pay at .
• b: production cost at .
• Difference overcome by subsidy and so
internalises the positive externality  increases
in Q and P to SOE (shown by b).

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