Ch 8 - Methods of Government Intervention in Markets

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19 Terms

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Black market
________: where goods and services are bought and sold illegally.
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Government
________ imposed price controls are necessary for consumers, producers, and societies Price controls:
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Inefficient allocation of sales
________: firms willing to sell at a lower price don't always get to do so.
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Subsidy
________: an amount of money paid by the government to a firm per unit of output.
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Indirect tax
a tax on spending/expenditure
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A percentage tax (Ad Valorem)
the tax is the percentage of the selling price
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Burden of the tax
who pays the tax
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Wasted resources
people spend money, time, and effort to deal with shortages
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Inefficient allocation of sales
firms willing to sell at a lower price don't always get to do so
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**Indirect tax**
a tax on spending / expenditure. Governments tax firms which increases its costs
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**A percentage tax (Ad Valorem)**
the tax is the percentage of the selling price 
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**DEED**
* Define 
* Explain all key concepts 
* Example from the real world 
* Diagram
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**CLASPP**
* Conclusions 
* Long and short term effects 
* Assumptions 
* Stakeholders 
* Priorities 
* Pros and cons
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**The tax burden and elasticity**
The outcome of the share of tax burden, size of market and amount of producer/government revenue depends on the PED and PES
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**Subsidy**
an amount of money paid by the government to a firm per unit of output
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**Black market**
economic activity that takes place outside government sanctioned channels 
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**Inefficient allocation to consumers**
people who want it and are willing to pay don't get goods and people who are interested in the convenient price get it 
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**Wasted resources**
people spend money, time, and effort to deal with shortages
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**Inefficiently low quality**
sellers offering low quality goods at a low price even though buyers prefer higher quality / higher prices