Market Failure and Government Intervention

A clear O-Level answer on how governments correct market failure. Indirect taxes, subsidies, regulation and bans, direct provision and information campaigns, how each works through demand and supply, and the drawbacks of each.

A clear O-Level answer on market failure and externalities. Why free markets can over-produce goods with external costs and under-produce goods with external benefits, with clear examples and the case for intervention.

A clear O-Level answer on merit and demerit goods. Why the market under-provides merit goods such as education and over-provides demerit goods such as cigarettes, the role of external benefits, external costs and information failure, and how governments respond.

A clear O-Level answer on price controls. How a maximum price (ceiling) below equilibrium causes a shortage, how a minimum price (floor) above equilibrium causes a surplus, why governments use them, and their side effects.

A clear O-Level answer on public goods. The two features of non-excludability and non-rivalry, the free-rider problem, why the market provides none of them, and why the government must provide them from taxation.