Question

1. Examine the effects of government policies in the light of the demand supply framework.

2. Explain the meaning of the elasticity of demand and supply and apply the concept of elasticity to real-world problems.

3. Describe the concepts of consumer surplus and producer surplus and apply the concepts to study the efficiency of the market and the inefficiency of government taxation.

4. Define price floor and price ceiling in economics.

5. Use the model of demand and supply to explain what happens when the government imposes price floors or price ceilings.

6. Discuss the reasons why governments sometimes choose to control prices and the consequences of price control policies.

7. Define of tax and subsidy.

8. Explain the effects of taxes and subsidies.

9. Describe the reasons for taxes.

10. Identify different government intervention methods in relation to taxes

and subsidies.

11. Provide a definition for elasticity.

12. Explain the concept of elasticity of demand and supply.

13. Explain the relationship between price elasticity of demand and total revenue.

14. Discuss the determinants of the elasticity of demand and supply.

15. Explain the importance of time as a determinant of price elasticity of supply.

Answer 1

Answer to the first question has been provided :

1) Effects of government policies:

Government policy can be termed as fiscal policies broadly . Apart from that there are tax policies , subsidy policies , tariffs and quotas etc . Fiscal policy can also be categorized under two heads : expansionary and contractionary . In expansionary fiscal policy , government starts to spend more and also give tax cuts . The motive of this policy is to expand money supply . This causes aggregate demand to rise in the economy . It is practised when there is a recessionary output gap in the economy . Vice versa contractionary fiscal policy is used to slow down the economy or combat inflationary gap . The AD curve shifts left in this case . Fiscal policy mainly affects demand in the economy , thus altering growth rate .