Government intervention

• Government intervention is used in order to correct a market failure and/or influence consumer behaviour
• Maximum price is used in an attempt to prevent the market price from rising above a certain level.Has to be set below the free market price.
• Minimum price is a legally imposed price floor below which the normal market price cannot fall. it has to be set above the normal equilibrium price
• Polluter pays principle ▪ The principle that the person who causes pollution should pay for the damage they cause
• Regulation is government rules and laws that can control the behaviour of producers or consumers in a market
• State provision is government provided goods or services to provide goods which have positive externalities
• Government failure is policies that causes a deeper market failure
• Net welfare loss is an overall loss of economic welfare when compared to the starting position
• Regulatory capture is a form of government failure this happens when a government agency operates in favour of producers rather than consumers
• Unintended consequences is a cause of government failure whereby the governments actions result in unexpected effects