Cambridge International as and a level Economics Ebook

1
Explain why a plastic bag in many Indian cities is 
seen as a demerit good. 
[4]
2
Using a diagram, explain the eff ects on the market of 
an indirect tax on the use of plastic bags. 
[8]
3
Comment on the case for introducing an indirect tax 
on plastic bags compared with that of banning their 
use in many Indian cities. 
[8]
In this chapter it has been shown that:
■
Markets do not always operate as suggested 
by economic theory. There are various 
reasons why markets fail, necessitating 
government intervention.
■
Government intervention can take various 
forms including regulations, financial 
intervention and direct provision of goods 
and services.
■
Financial intervention in the form of indirect 
taxes and subsidies is widely applied as 
a means of intervention in the normal 
workings of the market.
■
Transfer payments can have a beneficial 
eff ect on the distribution of income.
■
Nationalisation occurs when governments 
take control of the production of goods and 
services.
■
Privatisation has taken place in many 
economies in recent years, resulting in less 
government intervention in the market.
SUMMARY
Chapter 3: Government microeconomic intervention 
79

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Chapter 4:
The macroeconomy
AS Level
Learning objectives
On completion of this chapter you should know:
■
 
the determinants of aggregate demand and aggregate 
supply and the shapes of their curves
■
 
how changes in the price level are measured; money 
values and real values
■