Sunday, September 24th 2017

Market Distortion


Market Distortion Meaning:
Where government regulation causes a price or prices in a market to be different from those that would otherwise be freely agreed upon.

Market Distortion Example:
Many governments subsidize agriculture. The idea is to protect farmers from the risks normally inherent in farming and thereby ensure that there is a strong farming sector that can provide plenty of cheap food. However, the subsidies distort the market and cause undesirable effects. For example, poorer countries generally find it very difficult to compete with the heavily subsidized crops of richer countries on the international market, and suffer as a result.
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