3.6.2 Methods of government intervention

• What is the primary purpose of government intervention in the economy?

  Improve market efficiency
• One method of government intervention is setting maximum or minimum prices
• Subsidies are financial assistance provided to industries to lower costs and increase production.
• What is the role of regulations in government intervention?

  Ensure fair competition
• Nationalization involves bringing private industries under public ownership
• Match the government intervention method with its example:

  Maximum Price ↔️ Rent control

  Minimum Price ↔️ Minimum wage laws

  Subsidies ↔️ Support for renewable energy

  Taxation ↔️ Taxes on tobacco

  Regulations ↔️ Environmental protection laws
• Maximum prices are set below the market equilibrium to make goods more affordable.
• What is the primary benefit of subsidies for industries?

  Lower production costs
• Taxation is used to raise revenue and discourage undesirable behaviors
• Regulations ensure fair competition and protect consumers.
• What is the main goal of nationalization in an economy?

  Universal public services
• Minimum prices are set above the market equilibrium
• Subsidies for renewable energy sectors encourage production and reduce consumer costs.
• Match the government intervention method with its primary impact on the economy:

  1️⃣ Maximum Prices: Affordable housing, reduced availability

  2️⃣ Minimum Prices: Increased producer incomes, potential job losses

  3️⃣ Subsidies: Encourages production, reduces consumer costs

  4️⃣ Taxation: Discourages consumption, raises government revenue

  5️⃣ Regulations: Controls pollution, ensures fair practices

  6️⃣ Nationalization: Universal public services, government control
• How do subsidies affect production costs for businesses?

  Lower production costs
• Regulations are designed to ensure fair competition in the market.
• What are three methods by which government intervention affects business behavior?

  Price controls, subsidies, taxation
• Price controls influence business strategies
• Subsidies lower production costs for businesses.
• What is the primary effect of taxation on business behavior?

  Discourages certain behaviors
• Regulations ensure fair competition
• What does nationalization involve in government intervention?

  Transfer of ownership
• Subsidies for renewable energy encourage investment in sustainable technologies.
• What are five government intervention methods mentioned in the study material?

  Price controls, subsidies, taxation, regulations, nationalization
• Price controls may lead to shortages or surpluses
• Subsidies encourage production and reduce consumer costs.
• What is an example of a behavior discouraged by taxation?

  Use of tobacco
• Regulations ensure fair competition and protect consumers
• What is one benefit of nationalization mentioned in the study material?

  Universal public services
• What is the primary goal of government intervention in the economy?

  Influence the economy
• Government intervention methods include price controls, subsidies, taxation, regulations, and nationalization
• Price controls can make goods more affordable but may lead to shortages or surpluses.
• What is an example of a tax imposed to discourage undesirable behavior?

  Taxes on tobacco
• Arrange the following types of government intervention methods from most direct to least direct influence on prices:

  1️⃣ Maximum and Minimum Prices

  2️⃣ Subsidies

  3️⃣ Taxation

  4️⃣ Regulations

  5️⃣ Nationalization
• Subsidies are financial assistance provided to industries to lower production costs
• Why is taxation used as a government intervention method?

  To raise revenue
• Match the government intervention method with its primary purpose:

  Regulations ↔️ Ensure fair competition

  Taxation ↔️ Discourage undesirable behaviors

  Nationalization ↔️ Universal public services
• What is the effect of nationalization on private industries?

  Government takes ownership
• Minimum wage laws are an example of minimum price controls.
• What is the primary purpose of minimum wage laws in the labor market?

  Set a wage floor