(a)[2]
Identify two kinds of tax.
(b)[4]
Explain two functions money performs.
(c)[6]
Analyse the effects of market failure.
(d)[8]
Discuss whether or not taxing a product can reduce external costs.
Economics 0455 · IGCSE · Market failure
Market failure — practice question
Digital money, for example cryptocurrencies, is being adopted more widely. Transactions using digital money are carried out on electronic devices such as computers and smartphones. However, market failure may arise because external costs are created by the heavy energy consumption of non-renewable sources. One way to lower external costs is to tax the product.