Methods of government intervention

When does the producers take incidence of the indirect tax?

• When PED>PES

• When PES>PED

• It is up to the producers

• The tax burden is always split equally between consumers and producers

How does imposing the maximum price affect the market?

• excess demand

• excess supply

• unemployment

• good becomes inelastic

What is NOT a way to solve excess demand?

• Subsidies to the producers

• Direct provision to the consumers

• Distribute stored goods

• Sell goods abroad

How to maintain a minimum price?

• Impose an indirect tax

• Subsidize producers

• Quota for the producers

• None are correct

What is NOT a reason for governments to impose minimum price?

• Increase income

• Protect minimum wage

• Increase the demand for a good

• To limit consumption of e.g inexpensive alcohol or cigarettes

When the quantity demanded is lower because of the higher price

• The good is inelastic

• There is an excess demand

• There is an excess supply

• The supply is inelastic

Indirect tax is imposed upon the expenditure in order to

• Increase the quantity demanded

• Increase the quantity supplied

• Generate government income

• To stabilize market’s equilibrium