Government Failure

  • Created by: Becca_67
  • Created on: 29-12-18 09:03
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  • Government Failure
    • An unintended consequence of government intervention
      • Income Tax = disincentive to work hard
      • Price fixing = distortion of price signals
      • Subsidies = inefficient as the incentive has been removed
    • Excessive Government Bureaucracy
      • Red Tape can prevent markets working efficiently
      • Time Lags give the Country a competitive disadvantage
      • lack of investment
        • prevent an economyworking at full capacity
    • Conflicting Policy Objectives
      • achieving one has a negative effect on another
      • Governments often favour short term solutions
    • Inadequate Information
      • Imperfect or Asymmetric
        • difficult to asses extent of market failure
          • makes it hard to put a value on the government intervention thats needed
      • Governments may not know how people want resources allocated
      • Don't know how consumers might react
    • Administrive Costs
      • Government intervention can use a lot of resources
      • Some require policing which can be expensive
    • External Shocks

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