What can Governments do? Unit 5.4.6 Government Intervention

Learning Objectives To understand the difference between taxes, subsidies, legislation and regulation in influencing behaviour and providing incentives. To understand how these methods can influence business behaviour.

What can the Government do? Tax – the government can tax activities that inflict costs on others, such as smoking or driving. They can also tax business profits and the income of higher earners. Subsidies – they can give businesses money for acting in certain ways, such as investing in eco-friendly technology. Regulation – creating rules and laws to ensure businesses act in a way that don’t inflict costs on others because of their growth.