Unit 2.7 Role of government in microeconomics

When are markets unable to satisfy important economic objectives, does government intervention help?

Conceptual Understandings 

• The market mechanism may result in socially undesirable outcomes that do not achieve efficiency, environmental sustainability and/or equity. 

• Market failure, resulting in allocative inefficiency and welfare loss. 

• Resource overuse, resulting in challenges to environmental sustainability. 

• Inequity, resulting in inequalities. 

• Governments have policy tools which can affect market outcomes, and government intervention is effective, to varying degrees, in different real-world markets.