ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Government can affect markets either through direct participation (as a market maker or as a buyer or supplier of goods and services), or through indirect participation in private markets (for example, through regulation, taxation, subsidy or other influence).

Detailed explanation-2: -Governments can create subsidies, taxing the public and giving the money to an industry, or tariffs, adding taxes to foreign products to lift prices and make domestic products more appealing. Higher taxes, fees, and greater regulations can stymie businesses or entire industries.

Detailed explanation-3: -The government tries to combat market inequities through regulation, taxation, and subsidies. Governments may also intervene in markets to promote general economic fairness. Maximizing social welfare is one of the most common and best understood reasons for government intervention.

Detailed explanation-4: -Market failures can be corrected through government intervention, such as new laws or taxes, tariffs, subsidies, and trade restrictions.

Detailed explanation-5: -Minimum wage legislation is an obvious example, as are other forms of government intervention in the labor market, including trade union legislation, income policies, legislation governing hiring and firing, immigration controls, occupational licensing, and public employment.