Government Intervention in Markets

Definition

Government intervention in markets refers to the actions taken by the government to influence or control economic activities within a market. This can include implementing regulations, setting price controls, providing subsidies, or imposing taxes.

Analogy

Imagine a referee in a soccer game. Just like how the referee steps in to enforce rules and maintain fairness on the field, government intervention acts as a referee in the market to ensure fair competition and protect consumers.

Related terms

Price Controls: Refers to government-imposed limits on prices of goods or services. For example, setting a maximum price for rent in an area.

Subsidies: Financial assistance provided by the government to certain industries or businesses to encourage production or consumption of specific goods/services.

Taxes: Mandatory payments imposed by the government on individuals or businesses based on their income, profits, or consumption.