Government intervention is needed to correct market failures.
Indirecttaxes: cost of production that cause supply to shift to the left.
Subsidies: payments by the government that cause supply to shift right.
Minimum price: a price set above equilibrium price that it is illegal to sell below.
Maximum price: a price set below the equilibrium price that it is illegal to sell above.
Tradeable pollution permits: each firm is allocated a quantity of legal emissions, then they can buy or sell further rights to emit.
State provision of public goods: solves the market failure associated with public goods, where there would otherwise be a missing market due to the free-rider problem.
Provision of information: allows consumers and producers to realise the correct benefits and costs of their transactions, as well as the externalities. This helps to shift demand or supply accordingly towards the social optimum.
Regulation: banning or enforcing the consumption or production of a product e.g. education/ cigarettes for people born after 2010.
Government failure: when government intervention fails to resolve a market failure.
Causes of government failure: distorted markets, unintended consequences, excessive admin costs, information gaps.