Markets are effective in determining what and how to produce, but they do not take into consideration the interest of community. Therefore government intervention is necessary to make market function as well as change market outcomes when they are not satisfactory. Government intervenes and modifies the operation of the price mechanism to achieve a better allocation of resources, more equal distribution of income and economic stability.

Government intervenes:

- In market failures: when the private firms do not provide goods and services or the quantity provided is below what is socially desirable. Government intervenes to provide the necessary goods and services such as electricity, water, health care system, which are beneficial to the whole community.

- Inequality in distribution of income. Inequality tends to become entrenched in market economy. Child growing up in low-income family does not have the same access to information resources or educational assistance as...