year 11 economics (1 Viewer)

[penny.sullivan]

Using Australia examples, explain how governments intervene in the free operation of the price mechanism. How can this intervention be justified?

please help anybody!
what is price mechanism and government intervention?

due monday!
:]

 

[kezzaonline]

price mechanism is the determination of the forces of demand and supply of a product to determine the market price (i.e. equilibrium)

government intervention is when the government intervenes the market, often causing disequilibrium (i.e. not letting price mechanism to work)
governments may intervene by:
- price ceiling
- price floors
- negative externalities [taxes]
- positive externalities [subsidies]

i think i have the positive and negative externalities thing right, it's been awhile since my economics half yearly ^^"