The Government's Role in the Market

Class 7 Social Science · Chapter 12: Understanding Markets · NCERT Exploring Society: India and Beyond section 12.5

Learn

Markets run on demand and supply, but sometimes this does not work well, so the government steps in. It controls some prices: a maximum price on lifesaving drugs protects buyers, a minimum price for wheat, paddy and maize protects farmers, and minimum wages protect workers. Limits must be set carefully: too low and producers lose interest; too high and consumers suffer.

It sets quality and safety standards, for example testing medicines before approval and checking the net weight of packets. It limits harmful side-effects of markets, such as banning some single-use plastics and regulating polluting factories. It provides public goods like parks, roads and policing, which private sellers do not expect to profit from. Consumer protection is old in India: Kauṭilya told ghee traders to give buyers 1/50 extra to make up for ghee sticking to the measuring can. But too many rules can also make markets work poorly.

Explore: which role is the government playing?

1. Sort each action.

Remember

• The government controls some prices, sets quality and safety standards, and limits markets' harmful effects.
• It provides public goods like parks and roads; too many rules can also hurt markets.

Quick check

Why does the government set a minimum price for wheat?

1. to protect farmers from losses
2. to make wheat costly for everyone
3. to stop wheat farming
4. to help importers

Think about it

Should the government control the price of everything? Why or why not?

Practice

Practise with fresh questions at three levels (easy, medium, hard), some answered hands-on, with hints and worked answers. Get 4 of your last 5 right to finish the topic.