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1.4.1 GOV INTERVENTION, image, image, image, ABOVE EQ, BELOW EQ, image,…

- - - - ADVANTAGES
        
        -They can be set where MSB=MSC so can allow for the consideration of externalities.
        -Producers know in advance the price that they will receive.
      - DISADVANTAGES
        
        if min price is set too high there will be surpluses each year
        -Encourages over production which leads to inefficient allocation of resources.
  - - - ADVANTAGES
        
        -ADV, can allow more people to afford the product
        -Help prevent increase inflation
      - DISADVANTAGES
        
        DIS- distortion of price signals which causes excess supply and demand.
        
        -difficult for gov to know where to set the price
        
        -Both may lead to the creation of black markets.
- - - - Reduces instability of farmer incomes
      - -Ensures employments
      - -Helps to plan investment
- - - - ADV
        
        This corrects market failure by providing important goods which would have not otherwise been provided
        -The goods may have positive externalities.
      - DIS
        
        -Expensive and has high opportunity cost for government
        -Since the market is not involved the government may get the incorrect combination of goods.
  - - - -this is when the government intervenes to provide information when it may be asymmetric.
      - ADV- Helps consumers to act rationally, which allows the market to work properly.
      - Disadvantages-
      - -This can be expensive for the government to do
      - -The government may not always have the correct information.
- - - - -This is when the government gives out a fixed supply of permits to firms that allow them to pollute a certain amount.
      - -This gives them an incentive to decrease costs as the permits can be sold
      - -If the firm goes beyond permits they can be hit with legal action.
      - US sulfur trading scheme which decreased sulfur emissions by 40%.
      - EU emissions trading scheme decreased by 21%