Economics - The Competitive Market System - The Contemporary Market
The Contemporary Market
The government has (and still does) intervened in the market and the
operation of the price mechanism. Governments have used price controls,
specifically a fixed price above equilibrium (floor price) for products
such as eggs and milk. The purpose was to maintain an adequate income for
the producers. The government does not allow the market to set the price.
Consumption-based taxes, like excise duties, increase costs of production,
and so market supply decreases.
Pressure groups, lobbyists and institutional forces have been able to
influence prices in many markets. Conservation groups and environmentalists
have been able to stop production in some areas, restrict production in
others and force businesses to be financially responsible for the social
costs of their production. IRC (Industrial Relations Commission) decisions
on award wages can affect disposable income, costs of production and the
equilibrium price in most markets.
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