Question

In your opinion in what circumstances should the government intervene in the Market to change price and quantity?

Answer 1

Government intervention in the market should take place to regulate the price in appropriate manner. government intervention only be there in term of price control related to price ceiling and price floor. price ceiling is connected with situation in which government set a price below the market equilibrium that that is for the sake of society and their welfare. government employs price ceiling to make the goods and services in the approach to layman person so that they can consume as and when required. for example price of medical services which are set by government can be below the market price so they patient can avail the medical facilities easily and affordable manner. in price ceiling demand is higher than supplies so price is less but quantity demand will be increasing but supplier supply less product.

Government intervention in the market also take place in term of price flooring, government employs this control in order to provide minimum support price to supplier of goods and services. minimum support price that the government decide by intervening the market allow the supplier to charge a certain price of goods and services. above the market equilibrium as. people are very much sensitive to availability of goods and services. when they experience that supply of goods high then price should be down , it leads to loss to supplier so to make the supplier continue to produce, government set the the price accordingly. in the price floor demand is less than the supply so price is moderate and quantity demanded will be less but supply is something bigger.