AQA E CON 1: M ARKETS AND MARKET FAILURE The impact of government intervention on market outcomes You have now covered all the theoretical content for ECON1. Time to apply your knowledge of economic models to the real world.

1.5.4 T HE IMPACT OF GOVERNMENT INTERVENTION ON MARKET OUTCOMES  Candidates should be able to apply economic models to assess the role of markets and the government in areas such as health care, housing, agriculture and the European Union’s Common Agricultural Policy (CAP), transport and the environment

T EAM TASK  In teams select one market from the list  As a class you must ensure all markets are covered  Each team is to prepare a presentation and hand out applying your knowledge of government intervention and its impact on your chosen market  Carry out some research into your market (there are some examples provided to get you started)  Use appropriate government intervention diagrams to explain a range of scenarios e.g. in the housing market what happened as a result of UK Government intervention? How does EU Government intervention impact on agriculture?  Include factors that lead to a distortion of the market due to government intervention Health care Housing Agriculture & CAP Transport Environment

H EALTH CARE  The UK expects to spend £130 billion on healthcare in 2014 The National Health Service (NHS) is the biggest employer in Europe with approximately 1.5 million employees. The NHS was 60 years old in In the UK private health care is also provided through specialists such as BUPA. Does private health care work? Healthcare spending: where does the UK stand? Should the government intervene in markets?

H OUSING  Housing has been a central issue for government over the years  Pressure on the supply of housing has meant affordable housing has fallen Impact of government policies on the housing market. Should government allow building on ‘Green Belt’ land

A GRICULTURE AND THE CAP  The Common Agricultural Policy is the European Union’s farming programme  It includes agricultural subsidies provided to EU farmers The history of the CAP Slipper farming CAP reform Where is the money going?

T RANSPORT  Transport policy is at the forefront of public policy decision making  In the UK road, rail and air travel have become expensive and congested  All of them are seen to cause negative externalities  The humble bike leads to positive externalities Increasing the supply of cycling routes. Is government planning for the future? HS2 – for and against. Who should pay for roads? Railway fares.

E NVIRONMENT  There is debate regarding the best way to control pollution  Some commentators believe that there should be a tax on carbon emissions  Others believe that a permit to pollute system is more effective Tax v permits – the pollution debate. Is there government failure in the pollution market? Does trading scheme actually work? EU’s flagship scheme in jeopardy. Government regulation of the environment involves the use of pollution permits. What is emissions trading? Follow the links. How can you use economic theory to explain the tradable permit market? China follows EU lead