00:01
Looking at a situation here to find out if we can agree with the statement that if there's problems in the markets, government would generally be able to intervene and correct the situation.
00:12
So is it particularly true? we're supposed to be able to explain that, okay, so first of all, it's going to pretty much depend on the type of the economy we are dealing with.
00:27
Because not all economies operate the same way.
00:30
We do have one economic system known as the command structure.
00:36
This is where we have our socialist type of economy.
00:43
Then we have a mixed economy that incorporates both the features of a command and a capitalist economy, also known as the free market.
00:54
So, yes, in all these situations, you notice that there is a spectra of government intervention, but the difference is the level at which government can intervene.
01:08
So in a common economy, you know that there is certainty of a huge chunk of intervention by the government.
01:19
So the government literally controls the controls the, controls the, allocation of resources all right allocation of resources remember the objective of a market can be seen in two ways there is allocative efficiency as well as productive efficiency so you know command structure you are likely to find more allocation or allocative efficiency than you would find productive efficiency for the simple reason the government determines everything the market forces do not play an active role in this market.
01:59
So in a mixed economy, simply bears the features of both the command as well as the free market.
02:05
Now, no, free market here is probably what would base your analysis on because we are dealing with a market that consists or that has prices being determined by demand and supply.
02:20
All right.
02:21
So in this particular case where we have price and quantity and we have an equilibrium price and as well as an equilibrium quantity.
02:32
The assumption basically is that the market will provide for, will allocately provide the necessary product to those needing that product.
02:49
That will be the allocative efficiency and productive efficiency will be such that, these products are produced using minimum resources and without waste, that's productive efficiency.
03:02
So the question is, when the market fails to do that, is it possible that government intervenes and how often does it do that? well, to give a better picture of government intervention when it comes to the free market structure, you know, supply and demand, you obviously will identify with the different categories of markets.
03:30
So we have a product market...