Government Intervention in
Markets
AS Economics
Aims and Objectives
Aim:
Understand methods of government intervention
Objectives:
Define government intervention
Explain the reasons for government intervention
Analyse methods of government intervention
Evaluate methods of government intervention
Starter
• Define market failure.
• How might the following things cause market
failure?:
Externalities
Public Goods
Merit and Demerit Goods
Monopoly
Immobility of Labour
Government Intervention
• A failure of the free market to allocate resources
efficiently is normally good reason for government
intervention in that market.
• The intervention is designed to correct market failure
and achieve an improvement in economic and social
welfare.
Government Intervention
• The main reasons for intervention are:
 To correct market failure
 To achieve a more equitable distribution of income
and wealth
 To improve performance of UK economy
Government Intervention
• The main reasons for intervention are:
 To correct market failure
 To achieve a more equitable distribution of income
and wealth
 To improve performance of UK economy
Government Intervention Methods
1.
2.
3.
4.
Government legislation and regulation
Direct provision of goods and services
Financial intervention
Intervention to Close Information Gaps
Government Intervention Methods
Collective Memory Game
Discussion of Methods