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.
Why do governments intervene in markets?
Price Controls
Indirect Tax
Subsidies
Calculating the Effects (HL ONLY)