ECON 103 Lecture Notes - Lecture 8: Progressive Tax, Rent Regulation, Market Failure
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If skewed distribution of income is a concern, how can the government redistribute wealth and income: one way the government can redistribute wealth is through tax policies (for example they can implement progressive taxation) The approach we are taking to government intervention in markets: If yes for either, first remember what the basic issue was that prompted intervention in the first place: then ask: This is an example of government intervention in a market. The government imposes a price ceiling to control rent rates; however this often leads to deadweight loss and redistributes wealth. Even though rent control leads to deadweight loss it is often adopted by governments to ensure that markets are. It is important to note that any government action leads to redistribution of income. When dealing with market failure it is important to first understand why the market has failed and then design policies to fix it accordingly.
