Main forms of Government Intervention

2. Indirect taxes and subsidies (AO2 + AO4)

• Indirect taxes are taxes on consumption rather than income. They are imposed on the producer of goods/services. A Value-Added Tax (VAT) on everything in the supermarket is an example of this. Indirect taxes make goods and services more expensive.

• Subsidies are forms monetary government assistance for firms or an industry. The government may pay firms to produce a certain product, or encourage healthier alternatives. Subsidies make goods and services cheaper.

• Here are a series of diagrams meant to cover everything regarding indirect taxes and subsidies (use the arrows):

3. Direct provision of services (AO2)

• The government might decide to provide services itself instead of relying on the private sector. Libraries, for example, would not exist if the government didn't provide them.

4. Command and control regulation and legislation (AO2)

• The government might decide do command/control the market all by itself instead of letting private entities try and figure it out. By banning or restricting some products by law (tobacco), the government can easily intervene in markets.

5. Consumer nudges (HL) (AO2)

• Instead of outright ban goods and services, the government can nudge consumers in a little more subtle ways. 

• If the government puts "Smoking Kills" and pictures of rotten lungs stickers on cigarette packaging, consumers will still technically have the choice to buy them, but may be hopefully nudged away.