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From course:

Economics A Level (DONEEEEEEE)

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Question:

How can Market Distortions [Disequilibrium] Happen from Government Intervention? Use an Example with Income Tax, Fixing the Price, and Subsidies

Author: eric_galvao



Answer:

-Income Tax may be a Disincentive to Work Hard - Increasing your Earning means more Tax has to be Paid -Fixing the Price can also lead to Price Signals being Mucked up. Minimum Prices giving Suppliers the Ability to Mass Produce and Flood the Market -Subsides may make Firms less Efficient as they become more Reliant


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