Government Intervention and Positive Externalities
With the help of a diagram, assess the view that government intervention can be used successfully to correct market failure caused by positive externalities.
Externalities and Market Failure
CIE A LEVEL SPECIMEN PAPER 2023
1. Outline for the Economics Essay on Government Intervention to Correct Market Failure Caused by Positive Externalities:
A. Briefly explain the concept of market failure and its relation to allocative efficiency.
B. Introduce the essay question and the purpose of the essay.
II. Understanding Market Failure and Positive Externalities
A. Define allocative efficiency and its importance in resource allocation.
B. Explain positive externalities and their impact on society.
C. Highlight the under-production/consumption of goods/services due to positive externalities.
III. Government Intervention to Correct Market Failure
A. Discuss the role of government intervention in addressing market failure.
B. Describe various forms of government intervention, such as subsidies, positive advertising, and direct provision.
C. Explain how these interventions can help correct the under-production/consumption of output.
IV. Diagram Illustration
A. Use a labeled diagram to depict the impact of positive externalities on output levels.
B. Compare the market equilibrium point without considering positive externalities to the allocatively efficient level of output.
C. Identify the welfare loss caused by the market failure and the potential for improvement through government intervention.
V. Analysis of Government Interventions
A. Discuss the effectiveness of subsidies in increasing supply and achieving allocative efficiency.
B. Evaluate the use of positive advertising to stimulate demand and raise consumption levels.
C. Assess the benefits and drawbacks of direct provision of goods/services by the government.
VI. Evaluation of Government Intervention
A. Discuss the challenges in measuring the value of subsidies and making value judgments regarding their provision.
B. Highlight the time lag in the effectiveness of certain interventions.
C. Consider the costs and uncertainties associated with advertising and direct provision.
D. Analyze the net effect of government intervention and its variability based on the nature of the good/service.
A. Summarize the main points discussed in the essay.
B. Provide a balanced assessment of the effectiveness of government intervention in correcting market failure caused by positive externalities.
C. Offer a closing remark on the overall implications and potential outcomes of government intervention in such cases.
2. Tips to Answer the Economics Essay on Government Intervention:
1. Clearly define and explain the concepts of market failure, allocative efficiency, and positive externalities in the introduction to establish a solid foundation for the essay.
2. Use a diagram to illustrate the impact of positive externalities on the level of output and identify the welfare loss caused by market failure.
3. Ensure that each paragraph has a clear focus and connects to the essay question. Use topic sentences to guide the reader through your argument.
4. Support your analysis with relevant economic theories, principles, and examples to demonstrate a strong understanding of the topic.
5. Discuss different forms of government intervention, such as subsidies, positive advertising, and direct provision, and explain how each can address the under-production/consumption of output.
6. Evaluate the effectiveness of each government intervention method by considering their costs, time lags, and potential drawbacks.
7. Provide a balanced evaluation of government intervention by discussing both the positive and negative aspects of its impact on correcting market failure caused by positive externalities.
8. Use economic terminology accurately and precisely throughout the essay to demonstrate your understanding of the subject matter.
9. Structure your essay logically and coherently, ensuring smooth transitions between paragraphs and sections.
10. Conclude the essay by summarizing the main points discussed and offering a thoughtful assessment of the overall effectiveness of government intervention in addressing market failure caused by positive externalities.
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