Government Intervention | Edexcel A-Level Economics A (9EC0)
Government Intervention
- 65 questions
- 4 subtopics
- Theme 1: introduction to markets and market failure
- Paper 1 and Paper 3
Covers what a government can do about market failure and what goes wrong when it tries: taxes, subsidies and price controls, tradable permits, state provision and regulation, and the ways intervention makes things worse..
It covers indirect taxes and subsidies as interventions, maximum and minimum prices, and tradable pollution permits, state provision, regulation and government failure and government failure.
Sample questions from Government Intervention
Answer each one closed book first, then open the answer.
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Indirect taxes and subsidies as interventions
How does an ad valorem tax affect the supply curve on a diagram?
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It causes the supply curve to pivot and diverge from the original curve as price increases. -
Indirect taxes and subsidies as interventions
Explain why a subsidy shifts the supply curve downward.
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Because the subsidy reduces the cost of production per unit, firms are willing to supply the same quantity at a lower price, or more quantity at the same price. -
Maximum and minimum prices, and tradable pollution permits
What is a minimum price?
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A legally imposed floor below which the price of a good cannot fall. -
Maximum and minimum prices, and tradable pollution permits
What are tradable pollution permits?
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Licences issued by the government that allow firms to emit a specified quantity of pollution. -
State provision, regulation and government failure
Give three examples of how the government provides information to correct market failure.
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Health warnings on cigarette packets, nutritional labelling, and public health campaigns. -
State provision, regulation and government failure
How does distortion of price signals cause government failure?
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Intervention prevents prices from reflecting true scarcity and consumer preferences, leading to misallocation of resources. -
Government failure
Why do information gaps lead to government failure?
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Policymakers may lack sufficient knowledge about market conditions, consumer preferences or firm behaviour to design effective interventions. -
Government failure
How might minimum wage legislation cause government failure in labour markets?
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If set above the market equilibrium wage, it can create unemployment as the quantity of labour supplied exceeds the quantity demanded.
The 4 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Indirect taxes and subsidies as interventions | Recall questions on how a tax or subsidy shifts supply, how each is used to internalise an externality, and who ends up bearing the cost. | 18 |
| Maximum and minimum prices, and tradable pollution permits | Recall questions on the shortages and surpluses price controls create, where each is used, and how tradable permits put a price on pollution. | 15 |
| State provision, regulation and government failure | Recall questions on direct provision, the provision of information and regulation, and on what causes government failure. | 12 |
| Government failure | Recall questions on government failure through distorted price signals, unintended consequences, administrative costs, information gaps, conflicting objectives, regulatory capture and political short-termism, examples from labour, farm, housing and energy markets, and how it compares with market failure. | 20 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
Edexcel A-Level Economics A Active Recall Guide
Every topic, not just this one. 2,508 questions with their answers.