Direct provision, buffer stocks and provision of information

Learning objectives

Explain why governments provide public goods and merit goods directly, financed through taxation, and analyse the effects of supplying them free or below cost

Evaluate direct provision, considering excess demand, rationing by waiting lists, quality, efficiency and the opportunity cost of the tax revenue used

Explain, with a diagram, how a buffer stock scheme holds a commodity price within a target band by buying in good harvests and selling from stock in poor ones

Assess the problems of buffer stock schemes, including storage cost, perishability, funding and choosing the right target price

Analyse how information campaigns, labelling and warnings shift demand for merit and demerit goods towards the fully informed level, and discuss their limits