Question

From Harvard Business School HBX CORe 2020 Economics for Managers

Share a story or a link to a news article describing a government intervention in a market. Explain how the intervention changes the outcome of the market, and whether you think the intervention had a positive or negative effect.

Answer 1

News Article --Government intervention in the e -cigarette industry on both sides of the Atlantic. www.entrepreneur .com.July 21st ,2017.

Across the globe, e-cigarettes have become very popular since 2004.e-cigarettes have developed much in the US and UK because of free market economies.Government intervention , however , has changed the market.

In general , government intervenes in the market in order to reduce market inequities through regulation, taxation and subsidies.In order to increase fairness in the market , government at times intervenes . Thus the most important reason for market intervention is maximizing the social welfare. In this article market intervention in the e-cigarette industry became necessary because despite the support to e -cigarettes the government of UK and US felt that consumers need to be protected as businesses are motivated by profit and not full well being of consumers.So government intervention controlled the industry .Many people quit regular  smoking .

This intervention however had both positive and negative effects .Many economists are of the opinion that intervention by the government create problems instead of solving problems. In general ,the positive effects are that market failures can be eliminated by government intervention as environment pollution can be controlled by the government..Intervention of the government keeps the economy balanced and can prevent the economy from entering recesion.Market infrastructure of the nation will improve.Government intervention will regulate monopoly power and promote equatable distribution of income.However the negative effect is that by creating rules and regulations that people should follow, economic growth gets reduced.With government intervention market lacks discipline and so the scarce resources may not be used efficiently.

In this article we see that in the US , government intervention ie legislation by the government has actually pushed more people to start smoking instead of viewing e -cigarettes as a tool to quit  smoking.