Positive Externality - Subsidy
+ Welfare is maximised
+ Encourages small businesses and exports
- High opportunity cost
- Hard to target
- Inefficient
- Hard to remove
Positive Externality - Max Price
Legally imposed price for a good that suppliers cannot charge above.
Negative Externality - Indirect Tax
+ Social welfare is maximised
+ Raises gov revenue
- Difficult to target
- Conflict of raising revenue and solving externality
- Unpopular
- Black Market
- Regressive
Negative Externality - Min Price
Legally imposed price at which the price of a good cannot go below
Pros and Cons of Min and Max Price
+ Help solve externalities
+ Reduce poverty and increase equality
- Cause excess supply-demand
- Hard to set prices
- Leads to black market
Provision of Public Goods
Public goods underprovided so government provides them and funds them via tax.
+ Corrects market failure
+ Increased equality
+ Benefits of the public goods
- Expensive and high opportunity cost
- May produce wrong amount of goods
- May be inefficient since no incentive to cut costs
- May lead to corruption and conflict of interest
Provision of information
Government provides information so anyone can make informed decisions
+ Helps consumers act rationally
- Expensive and information needs to be updated
- Consumers may not listen
- Government may not have all information themselves
Last changeda year ago
