Direct Provision and Regulation
Role of Government in Microeconomics
Syllabus requirement
Government provision of services and regulatory legislation used to address market failures or promote access.
Summary
Direct provision and regulation are two forms of government intervention used when markets alone produce undesirable outcomes such as underconsumption, overconsumption, unsafe products or inequality. Direct provision means the government supplies a good or service itself, increasing access and equity for goods with positive externalities or public-good characteristics. Regulation uses rules, laws or standards to change the behaviour of firms and consumers, correcting market failures (for example by limiting pollution or requiring product information). Both approaches can improve social welfare but involve trade-offs such as opportunity cost, enforcement costs and the risk of government failure.
