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  • Nurul Ajlaa Ridzuan

    January 30, 2022 at 9:44 pm

    The reason for governments intervention is necessary in markets is mainly to address inefficiency. In inefficient markets where resources are not perfectly allocated, whereas some may have too much of resources while others do not have enough, government plays role to control these inequities through regulation, taxation, and subsidies. Taken some government interventions as examples, greater equality could be promoted in terms of income and wealth redistribution through taxation, market failure due to externalities could be overcome or reduced by providing subsidies and even major global health crisis affecting economy like Covid-19 pandemic could have immediate resolution through government’s disaster relief programs. Thus, the importance of government is non-arguable and is unavoidable. In my opinion however, as far as it helps to overcome inefficiency in market, there should be limitations to government interventions as too much in opposite will tend to cause an inefficient allocation of resources. There is risk of wrong decisions made by government due to influenced by political pressures which can lead to cases of biased economic monopoly. In addition to that, some government regulations and restrictions may also take away individuals’ freedom to make decision on how to spend, which somehow against the theory where the market is the most efficient determinant of deciding on how and when to produce.

    In relation to the consumers or markets behavior, to effectively sell a product or service, it is important for organizations to understand how consumers behave with regard to their purchases or buying decisions. The understanding of consumers behavior should involve examining types of product that certain types of consumers buy and when and how consumers decide among product options. In order to shape the effective business strategies, organizations must first gather data and analyze the consumers behavior in market, taking consideration the externalities like government interventions and macroeconomics factors existed. Only when business understand the consumers behavior, the management will be able to plan their production, marketing as well as product development. The analysis on consumers behavior should not been done only once at the starting point of the business but must be continuous from time to time taking available business internal data on sales volume or returns as part of analysis.