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Igsce Econ CH 24

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22 views14 pages

Igsce Econ CH 24

Uploaded by

agh.jaiganesh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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CHAPTER 24

The role of government


CHAPTER 24
Main Aim:
Students will understand WHY and HOW governments intervene in a mixed-
market economy

Lesson Objectives
All Students will understand what is government intervention
Most Students will understand the effects of a national minimum wage in the labour market

Some students will know how to achieve an A* in 8 mark exam questions

Activities: Keywords / Key Terms:


• Pollution permits short-video • Government intervention
• Government intervention worksheet • National Minimum Wage
• Class Discussion – Should governemtr
• Subsidies
• 8 Mark Past Exam Question
• Negative externalities
OBJECTIVES - GOALS
Government roles

 Local role: Tax collection leading to local services funding


 National role: achieving macroeconomic goals
 International role: Trading in a global economy
GOVERNMENT INTERVENTION TO DEAL WITH
EXTERNALITIES
 Both production and consumption can result in external costs or external benefits
REMEMBER: An external cost is a cost not included in the market price of the goods
and services being produced, i.e. a cost not borne by those who create it.
An external benefit occurs when producing or consuming a good causes a benefit to a
third party
 The government is likely to use a range of measures to reduce external costs and
provide external benefits including:
1. Taxes
2. Subsidies
3. Fines
4. Regulation
5. Pollution permits
GOVERNMENT INTERVENTION TO
PROMOTE COMPETITION
 Encourage the growth of small firms: Business start up schemes, subsidies,
protectionism
 Lower barriers to entry: Removing or lowering barriers, changes laws and
regulations
 Introduce anti-competitive legislation:
• eliminate practices that reduce competition
• promote and sustain competition in markets
• protect the interests of consumers
• ensure freedom of trade
DEALING WITH MONOPOLY POWER

 Monitoring monopolies
 Special industry 'watchdogs’
 Regulation changes
 Filling lawsuits for malpractice
PROTECT CONSUMER INTERESTS

Without government intervention, some firms may exploit consumers by using


anti-competitive practices or restrictive practices.
• increasing prices to higher levels than they would be in a competitive market
• price fixing, where a number of firms agree to fix the price of a product to
avoid price competition
• restricting consumer choice by market sharing
• raising barriers to entry by spending huge amounts of money on advertising,
which smaller companies could not match
FAIR TRADE ISSUES
Fairtrade is a system of certification that aims to ensure a set of standards are
met in the production and supply of a product or ingredient. For farmers and
workers, Fairtrade means workers' rights, safer working conditions and fairer
pay. For shoppers it means high quality, ethically produced products.
CONTROL MERGERS AND TAKEOVERS
 Mergers and takeovers usually result in a reduction of competition in a
market
 Large mergers are monitored by governments and can even be blocked the EU
has a large tradition on that matter
GOVERNMENT INTERVENTION IN THE LABOUR
MARKET: NATIONAL MINIMUM WAGE
Minimum wage: Minimum amount per hour which most workers are legally
entitled to be paid
For a detailed list click here
MINIMUM WAGE: REASONING

 To raise the incomes of low paid workers


 Minimum wages will benefit disadvantaged workers. Women, ethnic
minorities and low-income families benefit from minimum wages because
they reduce inequality and increase fairness
 Saves government money the need to pay welfare benefits will decrease
because NMW will raise incomes
 Higher wages may serve to motivate many workers
 Productivity gains: Employers might respond by making their workers more
productive to justify the higher wages. Invest more in training and replace
inefficient labour with more efficient machinery
THE IMPACT OF A MINIMUM WAGE ON
WAGES AND EMPLOYMENT
DO MINIMUM WAGES CAUSE JOB LOSSES?

 Not really or not always → might make firms more efficient and workers more
productive

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