Topic: Government Failure Q1 Fill in the gaps using the words below: Government failure occurs when an intervention leads to a ……………………………market failure or even worse: a …………………….. failure. As such, government intervention creates further……………………………….., a……………………………………. of resources and a loss of economic and social …………………………………………………. Policies may create more ……………………………… than winners Government failure can happen if a policy decision fails to create enough of an ………………………………. to change people’s actual behaviour losers new inefficiencies welfare misallocation incentive greater
Q2 Using your phone, tablet, PC or as part of a class discussion, write down two examples for each government failure © tutor2u
www.tutor2u.net Topic: Government Failure Q3 Match the government failure ‘point’ with the correct explanation: Value judgements: PED has a big effect on the effectiveness of policy Intervention does not always work in the way in which it was intended or the way in which economic theory predicts it should. Changing prices to change incentives and behaviour: Social science: Many people want a particular intervention because of their own vested interests. The effects of intervention cannot be forecast with great accuracy – people’s behaviour is subject to change One single intervention is unlikely to produce a solution to deep-­‐
rooted problems – build a variety of policy options into your discussion e.g. policies that work on market demand and market supply Market forces can be powerful in finding profitable solutions to problems Combinations of policies: The power of markets: The ‘law of unintended consequences’: Q4 Perhaps the best example of government failure was Prohibition in the USA in the 1920s and 30s. Write a 100 word paragraph to explain why this is an example of government failure. Try to include as much technical language as possible. © tutor2u
www.tutor2u.net Topic: Government Failure Q5 The UK has a national minimum wage – set by the Government to ensure that every worker receives an income that allows them to earn sufficient to pay for their basic needs at least. This minimum wage is particularly important to markets which traditionally pay low wages such as hair and beauty and restaurants. Draw a demand and supply curve for the restaurant market showing what would happen to equilibrium price and quantity demanded if the national minimum wage increased. Explain why this may have unintended consequences for the employees of restaurants. © tutor2u
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