Government actions can change how markets work. They can do this with things like controlling prices, adding taxes, and giving subsidies.

1. Price Controls:

   • Price Floors: This is when the government sets a minimum price for something, like a minimum wage. For example, if the minimum wage is $7.25 an hour, some companies might not be able to hire as many workers. This can lead to unemployment, especially for people who are just starting out or have fewer skills.
   • Price Ceilings: This is when the government sets a maximum price for things like rent. In places like New York City, rent control has led to fewer available apartments. Even though people need places to live, there are not enough apartments to go around due to these price limits.

2. Taxes:

   • When the government adds taxes to goods, like a $1 tax on cigarettes, it makes things more expensive for buyers. This also means sellers get less money for what they sell. Because of this, people might buy less, and sellers might provide less. This can cause problems for the overall economy. For example, the U.S. cigarette market lost about$2.5 billion a year because of this.

3. Subsidies:

   • These are payments that the government gives to businesses to help them lower their prices. For instance, in 2021, the U.S. spent over $5 billion to help corn farmers. This lower price can lead to producing too much corn, which can create problems like waste and environmental issues.

In conclusion, when the government steps in like this, it can create mismatches between how much people want to buy and how much is available. This can end up causing more problems in the economy than it solves.