government unintended market consequences

• What is the purpose of government intervention in markets?

  To correct market failure
• What are the different types of government intervention in markets?

  • Price Controls: Set prices below equilibrium
  • Taxes/Subsidies: Adjust costs or benefits
  • Regulation: Establish rules for market behavior
  • Privatization: Transfer state-owned assets to private sectors
• What is an example of price controls?

  Maximum rent for housing
• How do taxes and subsidies function in government intervention?

  They adjust costs or benefits to align supply and demand
• What is an example of regulation in government intervention?

  Food safety standards
• What does privatization involve?

  Transfer of state-owned assets to private sectors
• What is a common market failure that requires government intervention?

  Public goods
• What are the common market failures requiring government intervention?

  • Public Goods: Non-rivalrous and non-excludable
  • Merit Goods: Underconsumed despite social benefits
  • Externalities: Costs or benefits affecting third parties
  • Information Asymmetry: Unequal access to information
  • Monopoly: Single seller controls the market
• What government response addresses public goods?

  Provision by the state
• What is the government response to externalities?

  Taxation or regulation
• What is the government response to monopolies?

  Antitrust laws
• How do taxes and subsidies affect market equilibrium?

  They alter market equilibrium and incentivize production/consumption
• What is the impact of regulation on the market?

  Shape market structure and protect consumers
• What is the intended effect of privatization?

  Improve efficiency and promote competition
• What economic indicators are used to evaluate policy effectiveness?

  • Consumer Price Index: Measures inflation
  • Producer Price Index: Measures production costs
  • Market Share: Percentage a firm holds
• What does market share indicate?

  Percentage a firm holds in the market
• What are the unintended consequences of government intervention?

  When a policy's impact differs from the original goal
• What are the unintended consequences of different types of government intervention?

  • Price Controls: Shortages or surpluses
  • Taxes/Subsidies: Increased prices or reduced competitiveness
  • Regulation: Stifle innovation or raise administrative costs
  • Privatization: Reduced access or higher prices for services
• What unintended effect can price controls have?

  Shortages or surpluses
• What unintended effect can regulation have?

  Stifle innovation or raise administrative costs
• What unintended effect can privatization have?

  Reduced access or higher prices for services
• What is a likely unintended consequence of a maximum wage law?

  Increased unemployment as businesses reduce hiring
• What is a likely unintended effect of a tax on sugary drinks?

  Increased prices and reduced competitiveness of sugary drink businesses