Government failure
What Government failure means in Economics A-Level, as defined for AQA.
Definitions of Government failure
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Reference: AQA
A risk of government action such as bureaucratic inefficiency or information gaps, which must be weighed against the equity and stability it provides.
State intervention that causes a net welfare loss, often stemming from inadequate information, conflicting objectives and administrative costs.
A risk highlighted in arguments against public ownership, including political interference, bureaucratic inefficiencies, and moral hazard.
A risk emphasised by arguments against regulation, arising for example through regulatory capture or information gaps.
Arises when regulators set inappropriate price caps because of asymmetric information between firms and regulators.
Occurs when government intervention in the economy leads to a misallocation of resources.
Topics that use Government failure
- Competition policy (AQA A-Level)
- Government failure (AQA A-Level)
- Government intervention in markets (AQA A-Level)
- Public ownership, privatisation, regulation and deregulation of markets (AQA A-Level)
Related terms
- Regulation
- Monopoly power
- Price mechanism
- Administrative costs
- Allocative efficiency
- Asymmetric information
- Conflicting objectives
- Consumer welfare
Using Government failure in the exam
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