Economics Essay Telephone Masts

1332 Words6 Pages
Using the information in the data and your own economic knowledge, evaluate the economic case for and against governments attempting to influence how mobile phones are manufactured and used. (25) The government should intervene in the mobile phone market to correct market failure due to the presence of negative externalities. Negative externalities are detrimental third-party effects caused by the production and/or consumption of a good. A public good is a good provided free of charge to the consumer, by the government. A public good is non-excludable and non-rivalrous. A merit good is a good that gives positive externalities upon production and/or consumption. A merit good is non-excludable, yet rivalrous. The negative…show more content…
Therefore, the government should intervene to correct imperfect knowledge and decrease demand for mobile phones. Imperfect knowledge occurs when either the consumer or the producer know more than the other about the externalities that occur due to the production or consumption of a good. A government can use persuasion techniques to correct imperfect knowledge on the part of the consumer. Ways in which the government can do this include educational advertising and changes to the national curriculum to impart views the government deems will correct imperfect knowledge. It is argued that the production of mobile-phones exerts negative externalities on the Asian employees of the mobile-phone (Extract E, Line 16). An example of a negative externality on the Asian workers is that of low-wages paid by Western firms to employees in poorer, foreign countries. If the government’s policy of persuasion was successful, demand for mobile-phones produced by firms that incur low costs by paying lower wages should decrease (See Figure 2). This would decrease the quantity consumed of low-cost mobile phones, and reduce the negative externality of an inequality in the distribution of wealth and incomes, present in the production of low-cost mobile phones. If persuasion was successful, it would also provide incentive to firms that produce mobile-phones to increase wages and lower negative externalities, as demand would be higher in the market for mobile phones produced with

More about Economics Essay Telephone Masts

Open Document