Edexcel A Level Economics A:復(fù)習(xí)筆記3.6.2 The Impact of Government Intervention

Category: A-level課程, 教材筆記, 福利干貨 Date: 2022年9月28日上午10:50

The Desired Outcomes Of Government Intervention

Prices	Profit	Efficiency
Affordable?& stable prices	Permitting enough to keep firms in the industry?(normal profit)?but limiting how much they make so that?household income?is protected	Reducing wastage?of valuable resources & one of the best ways to achieve this is by developing?rigorous competition
Quality	Choice
Ensuring products are?fit for purpose?& contribute to a better?standard of living	Wider choice?improves the standard of living & also helps to improve product quality. More choice also generates more?economic activity?in an economy & increases the?gross domestic product (GDP)

Government intervention?is not always effective. Two of the main reasons for this are the existence of?regulatory capture & asymmetric information

Regulatory capture?occurs when firms?influence the regulators?to?change their decisions/policies?to align more with the?interests of the firm
- Firms spend millions?lobbying?regulators directly - or in many cases lobbying politicians who can issue instructions to the regulators e.g in 2021 the former UK Prime Minister, David Cameron, was caught in an embarrassing case of lobbying for a failed financial venture by a firm called Greensill Capital
Some lobbying activity is corrupt?& there is a fine line between influencing activity & bribing. The UK Government has an agenda to improve the?transparency?of any lobbying activity
Naturally,?regulatory capture?can completely prevent fair outcomes in the markets concerned

Often governments believe they are?making the best decision?in order to meet their aims
Many times it is not the best decision due to the fact that the government or regulators either?do not have the full & relevant information?- or they?do not understand the market?they are trying to regulate e.g. many financial markets are fast moving & incredibly complex
This existence of?asymmetric information?has been responsible for some spectacular?government failures

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