Unit 1: An excellent exam technique to help solve market failure!

A handy mnemonic to help remember different the four different ways that the government could intervene when faced with market failure is:


'LETS' intervene

Legislate - Banning stuff, age limits, restrictions on use etc

Educate - advertise duscuss in school etc

Tax - indirect (both specific and ad valorem)

Subsidise - spend money encouraging producion of merit goods (see article below)

You all should remember this for the exam, it will really help you solve problem of market failure....and remember, you must evaluate each policy!!! Look at the article below and think about the questions asked. (the post on China and congestion is also an interesting topic)

Government to Sunsidise Electric Cars

Click here to see short video describing one way of reducing the negative externalities produced by cars. The government is planning to spend £43 million to subsidise specific models of electric cars. This will reduce the cost by around £5,000 per car.


Do you think this is the best way of reducing pollution caused by cars?
Can you think of any other ways?


Remember, 'LETS' intervene (have you forgotten it already Freddie!!!!)