461559
Rationale for
Government
Intervention
- Three main reasons for policy intervention~
- 1 To correct for insntances of market failure
- 2 To achieve a more equitable distribution of income and wealth
- 3 To improve the performance of the UK economy
both domestically and on the international front
- 3 To improve the performance of the UK economy
both domestically and on the international front
- 2 To achieve a more equitable distribution of income and wealth
- 1 To correct for insntances of market failure
- The free market...
- Scarce resources are allocated through the
price mechanism where the preferences and
spending decisions of consumers and the
supply decisions of businesses come
together to determine equilibrium prices
- The free market works through price signals
- If demand is high, potential profit
from supplying increases, leading
to an expansion in supply to meet
rising demand from consumers
- The government may choose to intervene in
the price mechanism on the grounds of
wanting to change the allocation of
resources and achieve what they perceive is
an increase in economic and social welfare
- The government may choose to intervene in
the price mechanism on the grounds of
wanting to change the allocation of
resources and achieve what they perceive is
an increase in economic and social welfare
- If demand is high, potential profit
from supplying increases, leading
to an expansion in supply to meet
rising demand from consumers
- The free market works through price signals
- Scarce resources are allocated through the
price mechanism where the preferences and
spending decisions of consumers and the
supply decisions of businesses come
together to determine equilibrium prices
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