2.7 Role of governments in microeconomics

Price controls

a form of government intervention that sets a maximum or minimum price that producers can charge for certain goods or services

Price ceilings

the legal maximum price set by the government for a particular good or service to make goods more affordable, especially for low income consumers.

Minimum wage

price floor on the labor market to protect workers from wage exploitation

Price floor

the legal minimum price set by the government for a particular good or service, to protect the income of producers and workers, or to discourage consumption

Indirect tax

imposed on the expenditure of goods and services, paid to the government through producers

Specific tax

a fixed dollar amount imposed on each unit of output. amount of tax paid is independent of the price of the good

Direct provision of services

occurs when the government directly supplies goods or services in the best interest of society

command and control regulation and legislation

the laws governing certain activities or industries that aim to enforce or prevent certain behavior that is deemed socially desirable

subsidy

a form of financial aid given by the government, usually to producers in order to either reduce cost of production, increase output or reduce prices