4.1 - Government intervention in microeconomics - Government intervention in markets

Question 1

Reasons as to why a government may intervene in markets

Answer 1

• earn revenue for the government
• provide support to firms
• provide support to households on low income
• influence levels of production of firms
• influence levels of consumption of consumers
• correct market failure
• promote equity

Question 2

Earn revenue for the government

Answer 2

The lower the elasticity, the higher the government revenue.

Question 3

Provide support to firms

Answer 3

May be small firms that have just been set up or industry firms of which the growth the government would like to encourage.

Question 4

Provide support to households on low incomes

Answer 4

Some households do not have enough income to provide the basic necessities for their families