The Economic Reasons Why Government Sometimes Intervene in the Market and Whether Government Intervention Increase or Decrease Economic Efficiency.

The Economic reasons why government sometimes intervene in the market and whether government intervention increase or decrease economic efficiency.

The market has own routine operations which develop day by day various market regulatory mechanisms. The mixed economy is a combination of free market economy with government intervention where some of activities are undertaken by private firms, others by the government which has the mandatory and monopoly right. Government here is like invisible hand which controls market participants, guide them to follow law of the market and make reasonable allocating scarce resource (The Role of Government in Market Economies Economics, n.d.). To overcome market power, government actively participate in economy regulations and trying to arise out competitive market system, produce goods and services effectively with customer preferences, maximise costumer welfare and stop potential failure (Fraser, 2005). Government has many ways to influence the market, however, for economics class purposes, there are basically 3 main reasons why government intervene in market: to correct for market failure, to achieve a more equitable distribution of income and wealth and to improve the performance of the economy by using price control, tax and subsidy (The Main Reasons For Government Intervention Economics, n.d.). Also negative economic outcomes such as pollution, environmental and ecological degradation are problems why government intervene in the maintenance and working of the Australian market economy (Fraser, 2005).

Government has the important role mostly in income distribution. For example where high educational level and skills earns more than the another people and wages can’t be lowered sufficiently, may be a result in inevitable inequity among society members and unemployment (Fraser, 2005). Where loss of quality to consumers is a loss of honesty by companies but government seeks to tax high income earners so that they can pay...