What is the market failure that justifies goverment involvement in the economy?
Governments intervene in markets to deal with inefficiency. In an optimally efficient market, resources are perfectly allocated to people who need them within the amounts they have. In inefficient markets that's not the case; some may have an excessive amount of of a resource while others don't have enough. Inefficiency can take many alternative forms. the govt. tries to combat these inequities through regulation, taxation, and subsidies. Most governments have any combination of 4 different objectives once they intervene within the market.
Government interventions in an exceedingly private economy are intended to correct so-called market failures or to attain a societal objective. We focus here on government interventions to correct private market failures. Market failures can justify government intervention on market efficiency (economic) criteria. A key sort of market failure that government tries to handle in regulations and laws are externalities. Government policies are accustomed address societal concerns that are related to private market economies, like economic inequalities. For sustainable businesses, the foremost relevant market failures are externalities, and that we specialise in these as follows.
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