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Edexcel Economics 1.4 Knowledge
Terms in this set (23)
What is a minimum price?
A legal price floor below which the good cannot be sold
Give 2 reasons why a government may wish to put a minimum price on a product
1)To protect the producer
2)To discourage consumption
Draw an unguaranteed minimum price diagram
Does an unguarunteed minimum price cause a shortage or a surplus?
If an unguaranteed minimum price is imposed, does a firm's revenue increase or decrease?
Depends on elasticity
What is a guaranteed minimum price?
A legal price floor where the Government buys up the surplus
Draw a guaranteed minimum price diagram
If a guaranteed minimum price is imposed, does a firm's revenue increase or decrease?
Give a benefit of guaranteed minimum prices over unguaranteed minimum prices
Certainty for producers
Give a disadvantage of guaranteed minimum prices over unguaranteed minimum prices
Cost for government
What is a maximum price?
A price ceiling above which a product cannot be sold
Give 2 reasons why a government may wish to put a maximum price on a product
To protect consumers
To encourage consumption
Draw a maximum price diagram
Does a maximum price result in a shortage or surplus?
If a guaranteed minimum price is imposed, does firm's revenue increase or decrease?
What is a tradeable pollution permit?
A right to pollute a certain amount, which can be bought or sold
Explain 3 benefits of tradeable pollution permits
- Government have certainty over total emission levels
-Incentive for all firms to abate
-Firms with cheaper abatement cost abate more
Explain 3 disadvantages of tradable pollution permits
-Difficult to know how many permits to issue
-Difficult to verify emissions levels
-Danger of carbon leakage
How is state provision funded?
In what forms might the government provide information?
Education, adverts, leaflets
What is ('command and control') regulation?
Where government decides if and to whom goods can be sold
What is government failure?
Government intervention that fails to improve economic outcomes
What are 4 types of government failure?
distortion of price signals
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