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8. Government microeconomic intervention

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  1. 8.1 Government policies to achieve efficient resource allocation and correct market failure

    1. 8.1.1Policies for market failure

      • Application and effectiveness of measures to tackle different forms of market failure: - specific and ad valorem indirect taxes - subsidies - price controls - production quotas - prohibitions and licences - regulation and deregulation - direct provision - pollution permits - property rights - nationalisation and privatisation - provision of information - behavioural insights and 'nudge' theory

    2. 8.1.2Government failure

      • Government failure in microeconomic intervention: - definition of government failure - causes of government failure - consequences of government failure

  2. 8.2 Equity and redistribution of income and wealth

    1. • Difference between equity and equality

    2. • Difference between equity and efficiency

    3. • Distinction between absolute poverty and relative poverty

    4. • The poverty trap

    5. • Policies towards equity and equality, for example: - negative income tax - universal benefits and means-tested benefits - universal basic income

  3. 8.3 Labour market forces and government intervention

    1. • Demand for labour as a derived demand

    2. • Factors affecting demand for labour in a firm or an occupation

    3. • Causes of shifts in and movement along the demand curve for labour in a firm or an occupation

    4. • Marginal revenue product (MRP) theory: - definition and calculation of marginal revenue product - derivation of an individual firm's demand for labour using marginal revenue product

    5. • Factors affecting the supply of labour to a firm or to an occupation: - wage and non-wage factors

    6. • Causes of shifts in and movement along the supply curve of labour to a firm or an occupation

    7. • Wage determination in perfect markets: - equilibrium wage rate and employment in a labour market

    8. • Wage determination in imperfect markets: - influence of trade unions on wage determination and employment in a labour market - influence of government on wage determination and employment in a labour market using a national minimum wage - influence of monopsony employers on wage determination and employment in a labour market

    9. • Determination of wage differentials by labour market forces

    10. • Transfer earnings and economic rent: - definition of transfer earnings - definition of economic rent - factors affecting transfer earnings and economic rent in an occupation