Essays /

Why Government Intervention Is Needed In Essay

Essay preview

Essential guidance on economics exam technique:Ten ways to turn a good economics exam paper into a great oneWeesteps to evaluation - maximise your A2 economics marksRevision materials on the Economics blog: AS Micro | AS Macro | A2 Micro | AS Macro AS Market FailureGovernment Intervention in the Market |   |

In a free market economic system, scarce resources are allocated through the price mechanismwhere the preferences and spending decisions of consumers and the supply decisions of businesses come together to determine equilibrium prices. The free market works through price signals. When demand is high, the potential profit from supplying to a market rises, leading to an expansion in supply (output) to meet rising demand from consumers. Day to day, the free market mechanism remains a tremendously powerful device for determining how resources are allocated among competing ends.Intervention in the marketThe government may choose to intervene in the price mechanism largely on the grounds of wanting to change the allocation of resources and achieve what they perceive to be an improvement in economic and social welfare. All governments of every political persuasion intervene in the economy to influence the allocation of scarce resources among competing usesWhat 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 economyOptions for government intervention in marketsThere are many ways in which intervention can take place – some examples are given belowGovernment Legislation and RegulationParliament can pass laws that for example prohibit the sale of cigar...

Read more


-18 /economics/revision-notes/as-marketfailure-government-intervention-2.html 16 2006 50 a2 abil accid accur achiev act action activ addictionthes advert advertis affect ago aid alloc allow also alter alway among amount and/or anoth anti anti-competit appoint argu assist attempt author avail awar b ban bear becom behav behaviour belowgovern benefit better bid blog boost break british burden busi businesses.regulation c campaign capit carri cartel caus cent chang check children choos cigarett close colleg come compani compet competit compulsori congest consequ consequencesgovern consid consum consumers.the consumpt control corpor correct cost cost-effect counter cours creat credit criticis current d damag danger day de de-merit decis demand design desir detail determin develop devic differ difficult direct distribut drink drink-driv drive dynam e.g econom economi economist economyopt educ effect effici electr employ encourag end ends.intervention energi engag equal equilibrium equit equiti essenti eton evalu event everi exam exampl exist expans exploit extern extra failur failure.judging failuregovern fair fascin fat financi firm fix floor food form free fresh fund futur gain gapoften gas gcses generat geoff give given good govern great ground group grow guidanc hard hard-hit health help high higher hit hour household huge i.e identifi impact import impos improv includ incom increas indirect influenc inform inimprov intend inter inter-gener interven intervent interventionfisc interventionon introduc invest issu known label labour lack larg law lead legal legisl level like link list listto long longer loser low lower macro mail main maintain mainten make mani market marketsther marketth marksrevis materi maximis maximum may mechan mechanismwher meet merit micro might mind minimum monopoli much need negat network network.fiscal neutral never new nhs nutrit obes object offer often old one oneweestep oper opportun optim output overal own packag paper part particular pass patient pattern pay payment peopl per perceiv perform persuas place play point polici polit poor popul posit potenti power precis predict prefer prevent price price-fix price-floor prison privat problem produc product profit programm progressiveintervent prohibit promot protect provid provis public question quick rail rail.state rais rare rate rather realli reason red reduc reduct regul regulationparlia reli relief remain rememb research resourc respons result rich riley rise risk road role royal run sale scale scarc screen sector seek septemb servic servicesbecaus set short signal similar singl smaller smoke social societi sourc specif speed spend state state-own stay studi subsidi suffer suppli support sustain system take tape tax taxat techniqu telecom telecommun televis ten term theori therebi therefor thought togeth top topic toward transport tremend true turn twenti uk unintend unnecessari use useswhat util valu wage.the wait want warn way wealth welfar winner within work worker workplac would year