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Why might government want to intervene in the market? Give three examples and explain the rationale for each.

User Canpoint
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Answer:

Government should intervene in markets of services related to human capital formation i.e Education & Health

Step-by-step explanation:

Human Capital Formation is the development of skills & abilities in the human resource, making them more productive - through components like Education & Health

Government should intervene in these markets because:

  • These sectors (education, health) have long term & irreversible impacts on human resource i.e public
  • Their sellers have perfect information, but buyers have imperfect information about the quality of services
  • There is a risk of firms acquiring monopoly powers & exploiting the consumers
  • These are important to people's well being, but are unaffordable by many poor people

So: to prevent people from - long term adverse impacts, wrong information, monopoly exploitation & to make available to poor people. Govt intervention is necessary is certain markets.

User Frederik Prijck
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