Unit 2.7 · Role of Government in Microeconomics
Forms of Government Intervention
AO2AO4Diagram required
Syllabus Requirement
Includes price controls, indirect taxes, subsidies, direct provision of services, command-and-control legislation, and nudges (HL only).
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
Summary
Government intervention in microeconomics aims to influence market outcomes such as prices, output, and income distribution. This intervention is often necessary when markets fail to achieve efficient or fair results. Various forms of intervention include price ceilings, price floors, indirect taxes, and subsidies, each with potential benefits and drawbacks.