CAIE A-Level Economics 8.1.1 Policies for Market Failure

Practise applying indirect taxes, subsidies, controls, permits, regulation, provision and behavioural nudges to externalities, information failures and merit or demerit goods.

Exam points

choose a policy that targets the identified external cost, external benefit or information gap
use PED, supply response or permit incentives to predict the change in consumption or pollution
evaluate alternatives through targeting, administration, equity, fiscal cost and government failure

[Maximum number: 1]

What is the essential feature of nudge theory?

the aim of satisficing

the establishing of a legal requirement

the existence of a contestable market

the idea of persuasion

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8.1.1—Policies for market failure question 1