Government intervention revolves around any activity that a government engages in to influence the market economy positively or negatively based on the jurisdiction. Government intervention plays a vital role since it curbs the high probability of organizations practicing powerful monopoly.

Government intervention can improve the performance of an economy in the following scenarios;

1. When there is a market failure. Externalities or monopolies can characterize market failure. The implementation of regulations by the government here promotes efficiency.

2. When there is an inefficient allocation of resources. Inefficient allocation of resources renders a market economy inadequate, so there is a need for government regulation to enhance market equity.