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tradeable pollution permits
-Level of info the govt has (if the gov KNOWS how much pollution is allowed and its accurate,the policy will be more efficient & vice versa)//hard to know how many permits to set -if not enough firms can reduce pollution then the price for permits will increase and businesses will incur more costs -need for international co-operation -firms may pass permit price onto consumer externalities
indirect tax ev
-magnitude -difficult to set tax as there is conflict in raising revenue and saving externally -may create a black market -regressive and therefore can exemplify inequality -depends on PED
indirect tax advantages
-internalises externality and this maximises social welfare -raises gov revenue which can be used to solve externalities in different ways
subsidies advantages
-society reaches social optimum and welfare is maximised -has other positive impacts eg.encourages small businesses
subsidies disadvantages
-high opportunity cost -difficult to target as exact size of externality in production is unknown -can become inefficient if in place for a long time, -difficult to remove therefore gov loses lots of money
price controls advantages
-if set at MSB=MSC the they can help externalities by increasing welfare -A minimum price will ensure that goods are affordable, whilst a maximum price will ensure that producers get a fair price. Both of these are able to reduce poverty and can increase equity/equality.
price controls disadvantages
-distortion of price signals which causes excess supply/demand, -difficult to know where to set prices, -can lead to creation of black markets
state provision of public goods advantages
-corrects market failure -equality for essential goods and services -benefits of providing the good eg.if the gov provides healthcare it increases no of healthy workforce which increases supply
state provision of public goods disadvantages
-expensive,high opportunity cost -may breed government production inefficiency as there will be no incentive for the production of goods -may suffer from corruption -may produce wrong no of goods eg. hospital beds may not be enough
provision of info advantages
-heps consumers to act rationally(maximise utility, corrects market failure) -shifts demand to social optimum, welfare maximised
provision of info disadvantages
costs lots for gov no guarantee of success-consumers may not listen and act irrationally
regulation advantages
-hard touch intervention, consumers can't do anything but listen and this guarantees success In behaviour -solves market failure and maximises social welfare
regulation disadvantages
-monitoring costs -regulatory capture -firms may pass on costs
what are the effects of gov failure
-excessive administration costs -distortion of price signals -unintended consequences -info gaps
tradeable pollution permits
-Level of info the govt has (if the gov KNOWS how much pollution is allowed and its accurate,the policy will be more efficient & vice versa)//hard to know how many permits to set -if not enough firms can reduce pollution then the price for permits will increase and businesses will incur more costs -need for international co-operation -firms may pass permit price onto consumer
externalities
-magnitude of external costs/the magnitude of the externality -imperfect knowledge -difficulty of obtaining government intervention -->risk of government failure -time lag
indirect tax ev
-magnitude -difficult to set tax as there is conflict in raising revenue and saving externally -may create a black market -regressive and therefore can exemplify inequality -depends on PED
indirect tax advantages
-internalises externality and this maximises social welfare -raises gov revenue which can be used to solve externalities in different ways
subsidies advantages
-society reaches social optimum and welfare is maximised -has other positive impacts eg.encourages small businesses
subsidies disadvantages
-high opportunity cost -difficult to target as exact size of externality in production is unknown -can become inefficient if in place for a long time, -difficult to remove therefore gov loses lots of money
price controls advantages
-if set at MSB=MSC the they can help externalities by increasing welfare -A minimum price will ensure that goods are affordable, whilst a maximum price will ensure that producers get a fair price. Both of these are able to reduce poverty and can increase equity/equality.
price controls disadvantages
-distortion of price signals which causes excess supply/demand, -difficult to know where to set prices, -can lead to creation of black markets
state provision of public goods advantages
-corrects market failure -equality for essential goods and services -benefits of providing the good eg.if the gov provides healthcare it increases no of healthy workforce which increases supply
state provision of public goods disadvantages
-expensive,high opportunity cost -may breed government production inefficiency as there will be no incentive for the production of goods -may suffer from corruption -may produce wrong no of goods eg. hospital beds may not be enough
provision of info advantages
-heps consumers to act rationally(maximise utility, corrects market failure) -shifts demand to social optimum, welfare maximised
provision of info disadvantages
costs lots for gov no guarantee of success-consumers may not listen and act irrationally
regulation advantages
-hard touch intervention, consumers can't do anything but listen and this guarantees success In behaviour -solves market failure and maximises social welfare
regulation disadvantages
-monitoring costs -regulatory capture -firms may pass on costs
what are the effects of gov failure
-excessive administration costs -distortion of price signals -unintended consequences -info gaps
