Reasons for government interventing the economy

The government intervenes the market to correct serious market failures. A market is defined as an organisation that allows buyers and sellers to exchange goods or services. A market should be able to allocate the resources efficiently with competition in both sellers and consumers and consists of choices and quality. It should maximise the satisfactions of both consumers and sellers. But markets may create inequality of opportunity, which the disadvantaged groups are usually lack of …showed first 75 words of 343 total…

…showed last 75 words of 343 total…decrease the amount of the good or service consumers are able to purchase. The government intervenes with regulations such as price controls and taxation to redistribute the higher than normal profits. It is also to ensure equity between different income levels and disadvantaged groups. The intervention of the government is also to prevent fluctuation in the economy and try to smooth the peak and trough of the cycles in inflation and unemployment and restore stability.