IBDP Economics Chapter 4 Notes

government intervention

STUDY NOTES FOR ECONOMICS CHAPTER 4 – GOVERNMENT INTERVENTION

These notes have specially been curated by expert teachers to simplify and enlighten concepts given in IB Government Intervention HL. The notes are comprehensive in nature and are sufficient to study the chapter in depth and one need not look for other resources beyond the notes provided on our website which can be accessed for free. The notes for Government Intervention IBDP HL are available on our official website and can be downloaded for free. The material made available on Tychr’s website is available for all IBDP subjects and is specially curated after an extensive amount of effort to ensure that the notes are in consonance with the IB curriculum and are an amalgamation from various textbooks prescribed by the IBO.

In this chapter of government intervention we focus on more practical and day-to-day life economic activities. We firstly study Indirect taxes and learn how these indirect taxes can change the allocation of resources and the reasons behind their incidence. Next we look at excise tax and the effects of the same on market, customer, and social welfare. The chapter also explains the impact of the taxes on the stakeholders and how the society as a whole is a worse off mainly because of the under allocation of resources.

The concept of consumer surplus and producer surplus which are caused due to the imposition of indirect taxes are explained very well through graphs. We also look at the incidence of indirect tax on price elasticity of demand and price elasticity of supply- the more elastic or schedule the more of the tax burden will fall on the other side.

Another important thing to understand the chapter is subsidies and the impact of subsidies on market outcomes. Illustrations of the consumer and the producer surplus helps the student understand the incidence of taxes on the stakeholders better. This chapter talks about day to day chromic activities and price control is one of the important concepts- first we look at price ceiling which is a maximum legal price for a good and it is set below the equilibrium price for it to work and next we look at the price floor which is legally set minimum price and it needs to be above the equilibrium price for it to be effective. This chapter focuses on the government intervention in the day to day economic activities for the betterment of the society.