Essay On Government Intervention In Economy

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Economics is one field of social science that examines and analyzes the economic activities of people. Economic activities include production of goods and services, consumption expenditure of household and distribution of goods and services. It is a study of how people make choice with the limited resources that they have and satisfy their unlimited wants. Resources in economics include land, labor, capital and entrepreneur. It is very important that these resources are utilized efficiently in order to be a productive economy. According to Adam Smith, ‘Economics is the study of a nation’s accumulation of wealth’.
There are issues that need to be addressed by an economic system adopted in a country. Since resources are scarce,
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It can also help reduce income disparity between various groups in the economy . As for Malaysia,the various groups include between races, between urban and rural areas, and between West Malaysia and East Malaysia. Income disparity. Government can intervene in the economy using fiscal policy and monetary policy to help stabilize the economy. The fiscal policy is used to control aggregate demand and government expenditure in the economy. The demand pattern will be affected when there is a change in fiscal policy. The government can also intervene by fixing price floor and price ceiling.
The price floor or minimum price is the established price that is set by the government at a level above the equilibrium price. This price is not allowed to decrease below the minimum level so that sellers can sell their products at higher price. It is commonly being implemented on agricultural goods. The market condition when this is implemented is that there will be surplus of goods. It will lead to waste of resources for government and consumers aying more than the equilibrium price. This practice protects producers income especially
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