Government Intervention on Price System

Grace Frances
Mind Map by Grace Frances, updated more than 1 year ago
Grace Frances
Created by Grace Frances about 6 years ago
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Government Intervention on Price System
  1. How the Government Intervenes:
    1. Regulations
      1. Minimum Price Control (Price Flooring)
        1. Purposes: (e.g.)
          1. To discourage the consumption & Production of Demerit Goods
            1. So Governments can support buy purchasing the products of farmers
          2. Maximum Price Control (Price Ceiling)
            1. Purposes: (e.g.)
              1. To prevent monopolistic exploition of consumers
                1. So necessities can be affordable for those with lower incomes
            2. Financial Intervention
              1. Taxes
                1. Direct Taxes
                  1. Examples:
                    1. Corporate Tax
                      1. Income Tax
                    2. Indirect Taxes
                      1. Specific Tax
                        1. e.g.
                          1. Excise duties on Alcohol or Tabacco
                        2. Ad Valorem Tax
                          1. e.g.
                            1. Value Added Tax
                          2. Purposes:
                            1. Discourage Demerit Goods
                          3. Other Taxes
                            1. Proportional Tax
                              1. Progressive Tax
                                1. Regressive Tax
                              2. Subsidies
                                1. Purposes:
                                  1. To keep market prices of necessities low
                                    1. To encourage the consumption of merit goods
                                2. Government Provision
                                  1. Financed by the Tax revenue
                                    1. Transfer Payments
                                      1. Examples:
                                        1. Old Age Pensions
                                          1. Unemployment Benefits
                                            1. Child Benefits
                                          2. Direct Provision of Goods & Services
                                            1. Provision for those with low incomes
                                              1. Examples:
                                                1. Merit Goods
                                                  1. Health Care
                                                    1. Education
                                                2. Nationalism & Privatisation
                                                  1. Nationalism
                                                    1. Private -> Public Sector
                                                      1. Advantages:
                                                        1. Employees would feel more job security
                                                          1. Profits are reinvested in the business
                                                      2. Privatisation
                                                        1. Public -> Private Sector
                                                          1. Advantages:
                                                            1. More Efficiency
                                                              1. More competition
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