Se ha denunciado esta presentación.
Se está descargando tu SlideShare. ×

3.1 - Reasons for Government Intervention in Market.pptx

Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Anuncio
Cargando en…3
×

Eche un vistazo a continuación

1 de 10 Anuncio

Más Contenido Relacionado

Similares a 3.1 - Reasons for Government Intervention in Market.pptx (20)

Más reciente (20)

Anuncio

3.1 - Reasons for Government Intervention in Market.pptx

  1. 1. Reasons for Government Intervention in Market Prepared by Ms Viky Course: AL-ECO CHAPTER 3 Government Microeconomic Intervention
  2. 2. Today`s Discussion • Addressing the non-provision of public goods • Addressing the over-consumption of demerit goods and the under-consumption of merit goods (link back to ME) • Controlling prices in markets (taxes, subsidy, min price, max price)
  3. 3. • There are several types of government intervention on market equilibrium. • The form of interventions are fixing higher or lower limit on prices in certain markets and imposition of taxes and subsidies for certain items. • This type of government intervention in the market can be explained using demand and supply analysis. 3 Introduction
  4. 4. Government Intervention • The main reasons why government intervene market: ▫ To correct market failure: it is necessary for government to provide public goods and merit goods, as these goods will be underprovided in free market. ▫ Market failure: free market does not make best use of scarce resources. ▫ Improve the efficient in allocation of resources. ▫ To achieve equal income and wealth distribution.
  5. 5. Methods of Government Intervention 1. Regulation: various means by which government seeks to control production and consumption. • Rules and laws that applies to firms to control the free market. • Uses legal or other methods such as control of price, quality and quantity of goods and services that are produced or consumed. • E.g. doctor prescription to buy controlled drugs.
  6. 6. Regulation
  7. 7. Methods of Government Intervention • Advantage of regulations: • prevents overconsumption of merit goods • Avoid abuse of market power • Reduce pollution (externalities) • Allows local businesses to survive • Disadvantage of regulations: • Less freedom • Less competition among producers • Less revenue • Difficulty in implementation of regulation
  8. 8. Methods of Government Intervention 2. Financial intervention: use of taxes and subsidies. • Government uses taxes and subsidies as a financial tools to influence the production and price of the goods or services in an economy. • Tax: charges imposed by government on incomes, profits and some types of consumer goods and services to fund their expenditure. ▫ E.g. stamp duty, income tax, GST, service tax etc. Tax / subsidy affects the supply curve (paid by producers) Supply and demand don’t draw income tax
  9. 9. Methods of Government Intervention 2. Financial intervention: use of taxes and subsidies. • Subsidies: a direct payment or grants by government to producers, make the price paid by consumer less than it should be. ▫ Subsidies goods and services that benefit community and might not provide under free market. ▫ E.g. certain food, public transports, free school meals for kids from low income families.
  10. 10. Methods of Government Intervention 3. Government provision / direct provision • Government to take over the production of goods or services, either in part or in whole. • Supply the goods or services directly to customer free of charge. • State owned industries: electricity, water provision, railways. • Also applies to those industries supplied by both public and private sectors: education, hospitals.

Notas del editor

  • free market does not make the best use of scarce resources.

    ME – no gov intervention, under production and under consumption of public goods
    So there is necessity of gov to intervene
  • Casino entry age
  • Little or no taxpayer money, self regulate if strongly enforce
    Can be ignored
  • Influence – change spending pattern

×