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2.7 Role of government in microeconomics

Homearrow_rightRevision Notes arrow_right IBDP arrow_right Microeconomics arrow_right Role Of Government In Microeconomics
IBDP Economics · Change course

Level: SL and HL. Sections marked HL only are for Higher Level students.

Governments intervene in markets to raise revenue, protect consumers and producers, and correct outcomes the market gets wrong. Every intervention creates winners and losers.

2.7.1 Reasons for government intervention in markets
ReasonExample
Earn government revenueExcise duties on petrol, alcohol and tobacco
Support firmsSubsidies and production-linked incentives for electronics manufacturing in India
Support households on low incomesFree or subsidised food grains under India's public distribution system
Influence the level of productionSubsidies for solar panels; quotas on fishing
Influence the level of consumptionTaxes on sugary drinks; subsidies for vaccinations
Correct market failureCarbon taxes on polluters (topic 2.8)
Promote equityMinimum wages; price caps on essential medicines
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All Unit 2 topics← 2.6 Elasticity of supply  |  2.8 Market failure: externalities and common pool or common access resources →