Intervention in the market
What are the main reasons for government intervention?
The main reasons for policy intervention are:
•To correct for market failure
•To achieve a more equitable distribution of income and wealth •To improve the performance of the economy
Options for government intervention in markets
There are many ways in which intervention can take place – some examples are given below 1. Government Legislation and Regulation
* Parliament can pass laws that for example prohibit the sale of cigarettes to children, or ban smoking in the workplace. * Employment laws may offer some legal protection for workers by setting maximum working hours or by providing a price-floor in the labour market through the setting of a minimum wage. * The economy operates with a huge and growing amount of regulation. The government appointed regulators who can impose price controls in most of the main utilities such as telecommunications, electricity, gas and rail transport. Free market economists criticise the scale of regulation in t...