How the price mechanism determines the equilibrium price in the market and why governments may intervene

Matthew McDowell Assuming there is pure competition in the market place, and no government intervention, we are able to focus on how the price mechanism determines the equilibrium price in the market. Markets can be effective at resolving the basic issues of what and how much to produce at a certain price level although left to operate on its own, the market can still create unsatisfactory outcomes. When markets do not produce the desired outcome, …

…level although left to operate on its own, the market can still create unsatisfactory outcomes. When markets do not produce the desired outcome, it is known as market failure and when this occurs, governments may intervene in the market, even though it may not always be popular with consumers or businesses. Bibliography DIXON, Tim; O'MAHONY, John. The Market Economy, 2005 Edition. Leading Edge Education, 2004. McTAGGART, Douglas; FINDLAY, Christopher; PARKIN, Michael. Economics, Fourth Edition. Pearson Education Australia, 2003.