Government intervention in markets l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 11

Government Intervention in Markets PowerPoint PPT Presentation


  • 97 Views
  • Uploaded on
  • Presentation posted in: General

Government Intervention in Markets. Government Intervention in Markets. Working Time Directive. National Minimum Wage. National Minimum Wage. Wage Rate (£/per hour). S Lab. Min Wage. 4.90. Potential Unemployment.

Download Presentation

Government Intervention in Markets

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Government intervention in markets l.jpg

Government Intervention in Markets


Government intervention in markets2 l.jpg

Government Intervention in Markets


Working time directive l.jpg

Working Time Directive


National minimum wage l.jpg

National Minimum Wage


National minimum wage5 l.jpg

National Minimum Wage

Wage Rate (£/per hour)

S Lab

Min Wage

4.90

Potential

Unemployment

Government imposes a minimum wage above equilibrium at £4.90 per hour for those over the age of 22

Demand for labour from employers falls, supply of labour (employees) rises

Assume that the current equilibrium wage rate is £3.00 per hour which is seen as being unacceptably low

3.00

D Lab

100

200

300

No. Employed


Government failure l.jpg

Government Failure


Government failure7 l.jpg

Government Failure

  • Distortion of Markets:

    • Price ceases to act as a signal for resource allocation

    • Tendency for shortages and surpluses to exist in the long run

    • Difficult for people to make informed choices based on cost, value, etc.


Government failure8 l.jpg

Government Failure

  • Distortion of Incentives:

    • Income taxes – distort incentives to work

    • Business taxes – stifle initiative, investment and enterprise

    • May encourage ‘underground markets’ – smuggling, forgeries, etc.


Government failure9 l.jpg

Government Failure

  • Rent Seeking and Log Rolling

    • Consequence of having to make choices

    • Results from lobbying – often powerful sectors of the economy

    • Concessions or decisions made to provide one good or service at the expense of another

    • Chosen good may not be in interests of all but only to a minority who have a powerful influence over decision makers

    • (See James M. Buchanan (Nobel Prize winner) and Gordon Tullock – Public Choice Theory)


Government failure10 l.jpg

Government Failure

  • Administrative Cost:

    • High levels of bureaucracy

    • e.g. cost of administering CAP and farm support scheme is huge!

  • Conflicting Objectives:

    • e.g. reducing smoking and beneficial effects on health and welfare against rights of people to do as they please and tax revenue

    • Governments do not always know what is best for us – e.g. are the policies on illegal drugs/prostitution/pornography, etc. the right ones??


Government failure11 l.jpg

Government Failure

  • Inadequate Information:

    • Knowing the consequences of the policy (e.g. building new motorways)

    • Knowing the effect on other markets (e.g. steel tariffs in USA)

    • Lack of knowledge on costs and benefits – private costs – possibly yes; social costs???

    • Lack of knowledge about what the public actually wants – do we want a ban on smoking in public places??


  • Login