DP Economics Questionbank

A government decides to impose an indirect tax on unhealthy drinks. Discuss the consequences for the stakeholders in these markets.

Discuss the view that governments should tax the consumption of gasoline (petroleum).

Explain two reasons why a government might impose indirect taxes.

Define the term subsidies indicated in bold in the text (paragraph [2]).

Using a demand and supply diagram, explain the effect on the price and quantity of fuel consumed in Angola, caused by the elimination of domestic fuel subsidies (paragraph 4).

Using a demand and supply diagram, explain the impact on the market for fuel of the government’s decision to reduce fuel subsidies (paragraph 2).

Discuss the consequences for different stakeholders in the economy of the government providing subsidies on goods, such as renewable energy.

Explain two reasons why a government might want to subsidize a good or service.

Using a demand and supply diagram, explain the effect of government subsidies on the US corn market (paragraph [5]).

Draw and label the new supply curve following the granting of the subsidy to domestic cotton producers on Figure 3.

Calculate the cost to the government of San Marcus of providing this subsidy to domestic cotton producers.

Discuss the view that the provision of subsidies by the government on goods such as agricultural products will always be beneficial to stakeholders.

Using a demand and supply diagram, explain how the cut in fuel subsidies may have had “severe consequences for low-income households” (paragraph [7]).

Discuss how the introduction of a subsidy in a market will affect consumers, producers and the government.

Discuss the view that price floors are more effective than subsidies in providing assistance to producers in the agricultural sector.

Explain why governments provide subsidies.

Using a demand and supply diagram, explain the impact on households of “removing some subsidies on food” (paragraph [5]).

Discuss the view that governments should not intervene in housing markets.

The government in Alpha imposes a price ceiling of $5 per kilogram.

Calculate the change in the consumer surplus after the imposition of the price ceiling.

The government in Alpha imposes a price ceiling of $5 per kilogram.

Calculate the welfare loss after the imposition of the price ceiling.

Explain why a government might decide to impose a price ceiling on goods and services such as essential foods or rented housing.

Using an appropriate externalities diagram, explain why a government might decide to impose a price floor on a demerit good.

Using a demand and supply diagram, explain why the increase in the minimum wage might affect Cambodia’s garment manufacturing competitiveness against other countries in the region (paragraph [4]).

Explain one possible advantage and one possible disadvantage of governments setting a price floor in agricultural markets.

Draw and label on Figure 1 a curve that illustrates the price floor in Nissos that leads to a monthly surplus of 3 million kg of corn.

State one measure that the government of Nissos might take to deal with this corn surplus, following the imposition of the price floor.

Using Figure 1, determine the size of the decrease in monthly corn consumption following the imposition of the price floor.

Using Figure 1, calculate the change in consumer expenditure on corn in Nissos.

Explain the impact of a price floor on market outcomes.

Discuss the consequences for different stakeholders when the government imposes a price ceiling on a market.

Discuss the view that price floors are more effective than subsidies in providing assistance to producers in the agricultural sector.

Explain why governments impose price floors in the market for agricultural products.

Evaluate the effectiveness of price floors in achieving a reduction in the consumption of demerit goods.

Calculate the shortage resulting from the imposition of the maximum price.

Calculate the change in producer surplus resulting from the imposition of the maximum price.

Calculate the change in consumer expenditure on rice resulting from the imposition of the maximum price.

State two methods of non-price rationing.