Government Intervention and Market Failure (Joshua)

Resource Description

Essay: Explain some of the problems that may arise if there is heavy reliance on free markets in an economy. Examine the role that the government can play in resolving some of these problems.

Intro: A free market system (laissez-faire) is a system driven by demand and supply as well as the actions of private firms to make a profit with minimal government intervention. However, the free market system is not perfect as there is always a tradeoff between equality and equity which makes the need for government intervention apparent. Market failure, which is the occurence of inefficient outcomes can arise in the provision of goods and services, income distribution, externalities, the abuse of market power and economic instability are all issues that force the government to take an active role of administering. There is heavy debate among society to find the right balance between too much government intervention, which would limit innovation,efficiency as well as economic growth, and too little, which would promote instability and inequality.