Role of Government in Microeconomics

Subdecks (7)

Cards (14)

  • The government may choose to intervene in economic activity because the free market (price mechanism) may result in socially undesirable outcomes or fail to achieve economic efficiency, environmental sustainability, and/or equity.
  • There are multiple reasons for government intervention:
    • Earn government revenue
    • Support firms
    • Support households on low incomes
    • Influence the level of production
    • Influence the level of consumption
    • Correct market failure
    • Promote equity