Government Intervention | Model Answer
A-level Economics
“Discuss whether services such as healthcare should be entirely provided by the government rather than an alternative method of intervention like government subsidisation of firms.” (25 marks)
Here is a question and answer from the markets and market failure section of the A-level Economics syllabus.
This question is a ‘discuss’ question - the type of question students need to practice their exam technique. In some exam boards, this is the ‘25 marker’.
I have seen so many capable students drop a few marks on these sorts of questions simply because they do not evaluate the scenario with enough scope.
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Discuss whether services such as healthcare should be entirely provided by the government rather than an alternative method of intervention like government subsidisation of firms. (25 marks)
The question asks you to discuss the reasons healthcare should be provided by the government vs an alternative method of intervention. You will need to structure this properly, never forgetting to stick to the question be asked. This will then be followed by a conclusion.
THE FREE ESSAY PLAN BELOW CAN BE USED AS A GUIDE TO HELP YOU WRITE YOUR RESPONSE.
Essay Plan
Possible Definitions
Market failure
Market failure occurs when the free market mechanism fails to allocate resources efficiently. In these circumstances, the government may choose to intervene in order to restore social welfare.
Government Intervention
One way the government can intervene is by subsidisation. This is when the government makes a payment to a firm, usually in order to promote production/consumption of the good/service provided.
The Argument (For and Against)
Case for government provision
Everybody is able to benefit from the service - a more equal society - helps increase welfare for those at the bottom
Taxation revenues used to provide the service - progressive taxation - may help levels of inequality
Government provision not concerned with profit maximisation - other performance metrics could matter more in the context of healthcare
Case against full provision
Opportunity costs of full provision
Free market might yield greater efficiency
Consumers may abuse and overuse
Case for alternative policies such as subsidisation
Subsidies can incentivise firms to produce more healthcare output
Market price may be lower
With sufficient competition market can be efficient - productive and allocative
Case against subsidies
Subsidies depend on factors such as PED
Subsidies may not be passed onto the consumer
Firms are incentvised by profit - so should they be providing your healthcare?
Competition is a vital component for market efficiency and subsidy to be effective
Opportunity costs of subsidy money
Conclusion
Should the government fully provide healthcare services, or should they subsidise?
Weigh up your responses to the above and evaluate
Diagrams you could use
Externality diagrams related to healthcare
Subsidy diagram
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