#subsidies #rulesandregulations #economics

Subsidies

• Governments often provide subsidies to encourage the consumption of certain goods or service

• Example -: Public transport are provided as a subsidy to stop the consumption of private vehicles

Diagramatic Representation Of Subsidy

Rules And Regulations

• Government can impose rules and regulations to solve market failure

• Example -: Imposing laws that state a minimum age of consumption of alcohol and other demerit goods

  
  

Graphical Representation Of Rules And Regulations

Advantages Of Rules And Regulations To Correct Market Failure

• Consumption of goods or service may be reduced as they might be demerit

• Awareness of negative impacts on demerit goods ( Drinking And Driving )

• Awareness on positive impact of supplying merit goods ( Education )

Disadvantage Of Rules And Regulations To Correct Market Failure

• Restrictions cause underground market to produce goods and service at a high price

• The government has no rights on the quality of products produced in a underground market

• People Break Rules - Example-: Under-aged Smokers And alchohol users with fake id