Question

“Market inefficiency is necessary but not sufficient condition for government intervention”.

Discuss four reasons in view of this assertion

Answer 1

Market inefficiency is regarded as a situation where the allocation of goods and services by the market is not in efficient manner and government take action regarding this. But Market inefficiency alone is not a sufficient reason for government intervention. The government settled the market inequities through regulation, taxation, and subsidies. There are other reasons for government interference like-

• Governments intervene in markets to promote general economic fairness.
• Maximizing social welfare also one the reason for goverment intervention.
• Promoting other goals, such as national unity and advancement also one of the reason for government intervention.

Hence, the Market inefficiency is necessary but not sufficient condition for government intervention..

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