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What are externalities and what forms of government intervention might help to correct the market failure from externalities? Externalities and ways of managing them In many situations the market fails to capture the external impacts of a transaction. These impacts can be benefits or costs. These side-effects of economic activity can be: the result of production or consumption a benefit (a positive) or a cost (a negative). These side effects…

Sketch fully labelled and annotated demand-supply diagrams showing how equilibrium prices and quantities traded in the market adjust in response to government decisions. Describe what is shown in each sketch and explain why the government may want to vary the supply of these goods or services. An increase in the rate of excise tax on alcoholic beverages Image: Blank supply and demand diagram. The vertical axis shows price and the…

Your task is to work in groups to research and analyse how and why governments use taxation to influence the production and consumption of goods with social costs. Use the following scaffold to guide your research: Explain how and why negative externalities result in the inefficient allocation of resources. What is the good you are investigating (for example, leaded fuel, cigarettes, alcohol)? What social costs (negative externalities) are…

How to explain the supply-side policies with the example of subsidies for electric cars. Assuming that the subsidy is a per unit subsidy and all other things being equal, the supply curve will shift vertically downwards by the amount of the subsidy. In this case the new supply curve will be parallel to the original. Figure 1 illustrates this increase in supply as a shift of the supply curve from S1 to S2. The shift of the supply curve for…

Income distribution Income distribution refers to how a nation’s total income is shared amongst its population. The pattern of income distribution is regarded as fairly even if all people receive a similar share of the national income. A fair or equitable distribution of income does not mean that everyone should have an equal share of total income, but that all people should have enough income to be able to purchase basic goods or services and…

Use this guide as you read Income distribution, inequality and poverty – Explainer. What does equitable income mean? Is it the same as equal income? What is considered to be ‘enough’ income? What does the line of equality represent on a Lorenz curve? Do you think Australia’s graph will be close to the line of equality or further away? Why? What does the Gini coefficient measure? What is the coefficient for maximum…

The Australian Government supports Australians with the greatest needs through the welfare system. In Australia, welfare is the direct cash benefits that are provided to the most disadvantaged groups, such as the unemployed, the aged, the sick, poorer families and family carers. These direct cash benefits provide income support to the neediest Australians so that they can better afford to meet their needs and enjoy a reasonable standard of…

Use this resource to complete the questions on the Poverty and the distribution of income in Australia – Data analysis worksheet. Table 1: Income share of Australian households 2015–16 Income share % Lowest quintile 7.7% Second quintile 12.5% Third quintile 17.0% Fourth quintile 23.0% Highest quintile 39.8% All…