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    Role of The Government

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    soham waman

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    © All Rights Reserved
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    Role of The Government

    Uploaded by

    soham waman
    5 views2 pages

    Original Title

    Role of the Government (1)

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    Copyright:

    © All Rights Reserved
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    5 views2 pages

    Role of The Government

    Uploaded by

    soham waman

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Role of the Government

    Question - Explain the role of the Government in the market.


    Ans -1. Correct market failure in many markets,there is a
    less-than-optimal allocation of resources from society's point of view
    so governments intervene to influence the level of production or
    consumption In maximising their self-interest, firms & consumers will
    not self-correct this misallocation of resources & there is a role for the
    government E.g. Tobacco consumption is an example of market failure
    that the government has attempted to address by using indirect taxes
    to reduce consumption
    2. Earn government revenue Governments need money to provide
    essential services, public & merit goods.
    Revenue is raised through intervention such as taxation, privatisation,
    sale oflicenses (e.g. 5G licenses), & the sale of goods/services
    3. Promote equity Equity is a normative concept. Governments aim
    to reduce the opportunity gap between the rich & poor butthe extentto
    which it occurs depends on whatthe society & government believe to
    be fair. Ways in which equity is promoted include: Laws to protect
    workers e.g. minimum wage laws, health & safety laws Laws to
    prevent monopolies from forming as they resultin higher prices Laws
    to prevent environmental damage
    4. Support firms In a global economy, governments choose to
    support key industries so as to help them remain competitive. Ways in
    which they do this include: Providing subsidies ortax breaks Limiting
    foreign competition until new firms are well established & are able to
    compete internationally
    5. Support poorer households Poverty has multiple impacts on both
    the individual & the economy Intervention through a range
    redistribution policies such as progressive tax structures & welfare
    payments helps to reduce poverty.
    Four of the most common methods used to intervene in markets are
    indirect taxation, subsidies, maximum prices, & minimum prices.

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