Ch 8 - Methods of Government Intervention in Markets

Black market

________: where goods and services are bought and sold illegally.

Government

________ imposed price controls are necessary for consumers, producers, and societies Price controls:

Inefficient allocation of sales

________: firms willing to sell at a lower price don't always get to do so.

Subsidy

________: an amount of money paid by the government to a firm per unit of output.

Indirect tax

a tax on spending/expenditure

A percentage tax (Ad Valorem)

the tax is the percentage of the selling price

Burden of the tax

who pays the tax

Wasted resources

people spend money, time, and effort to deal with shortages

Inefficient allocation of sales

firms willing to sell at a lower price don't always get to do so

**Indirect tax**

a tax on spending / expenditure. Governments tax firms which increases its costs

**A percentage tax (Ad Valorem)**

the tax is the percentage of the selling price 

**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

**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

**Subsidy**

an amount of money paid by the government to a firm per unit of output

**Black market**

economic activity that takes place outside government sanctioned channels 

**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 

**Wasted resources**

people spend money, time, and effort to deal with shortages

**Inefficiently low quality**

sellers offering low quality goods at a low price even though buyers prefer higher quality / higher prices