Those are from the year 11 Economics syllabus (Preliminary Topic Three – Markets) under "Examine economic issues". Are those assessed in year 12?
Alternatives to market solutions:
I'm not sure about the first two issues as I have not done Economics, but in terms of the third one, the syllabus states
the role of government, which is manifest in
ceiling prices and
floor prices. In terms of
price intervention, when the government senses the market determined price is not right, it will intervene using the approaches mentioned earlier.
Ceiling prices involve the government imposing a maximum price that a business can charge for a product. This is designed to protect consumers from being exploited by companies or if the product is a necessity, such as water and medical products.
Floor prices involve the government setting a minimum price that a business can charge for a product. This is designed to protect businesses by guaranteeing them a minimum price and hence a minimum wage and has a tendency of being applied to prices of products in the agricultural sector in order to protect the large number of Australian farmers.
This syllabus point also includes
market failure – merit goods, public goods, externalities.
Market failure is an economic situation characterised by an inefficient distribution of goods and services in the free market.
In terms of the role of government in the case of market failure, government intervention occurs for two major reasons:
- Equity: Unfair distribution of resources in the market.
- Social efficiency: The market may fail to provide sufficient components that are considered important by society, such as education.
There might also be
quantity intervention from the government if quantities produced in a market are either too high or too low. This may be done by restricting the production levels of these products by imposing a tax (on tobacco and alcohol as a method of reducing health costs for example) and creating relevant laws in that regard.
In terms of terminology:
- Merit goods are products that the government believes people will under-consume, and which should be subsidised/provided for free so that their consumption does not depend on the ability to pay for the product.
- Public goods are products that benefit society, which are usually provided free through public taxation.
- Externalities are consequences of particular business activities/actions that affect other parties without this being reflected in market prices. An externality can be both positive or negative and can arise from either the production or consumption of a good or service. Externalities are generally environmental. An example of a negative externality would be a business causing pollution, which causes a detriment to property values or people's health in the surrounding area.
Sorry that this isn't complete, but I hope it helps!
