Government intervenes-production is affected

Regulation occurs when the government steps into a market to affect the price, quantity, or quality of a good.

Example of Regulation:

Sometimes the government regulates production due to a safety issue. The government can require car producers to include air bags, which increases production costs. Therefore, the producer has to sell fewer cars. This would be an example of a tighter government regulation which shifts the curve to the left. This unfortunately makes most cars unaffordable for Americans. You are forced to choose between safety or a low price.

Comment Stream