Ways of reducing the defects of price mechanism
- Forming consumers’ association to educate and sensitize the consumers about the quality of commodities brought in the market. This helps to reduce on consumers’ ignorance.
- Taxing the rich and subsidizing the poor. This helps to reduce income inequalities through progressive taxation where the rich are taxed more than the poor. The standards of living of the poor can be improved.
- Using price controls by the government. Government can fix either the minimum or maximum price for the commodity as a way of regulating price fluctuations in the economy.
- Using anti-monopoly This is where the government demonopolises private monopolies by setting anti-monopoly laws which help to reduce consumer exploitation by private monopolists.
- Reducing on social cost. This is done by over taxing and issuing costly licenses in order to discourage producers from over exploiting natural resources.
- Subsidizing weak and small producers by the government. This enables such producers to remain in the production process and compete favorably with the big firms. This helps to reduce on unemployment caused by firms being out competed from the production process.
- There is need for proper planning to reflect structural changes, detect future needs of society and direct economic growth through government intervention.
CATEGORIES Economics
TAGS Dr. Bbosa Science
