Literature Review: The Impact of Government Interventions on Market Equilibrium and Welfare Surplus
Keywords:
Consumer Surplus, Government Intervention, Islamic Economics, Market Equilibrium, Producer Surplus.Abstract
This descriptive qualitative literature review examined how government intervention affects market equilibrium and the distribution of economic welfare among consumers, producers, and the public sector. Academic publications were purposively selected from journal websites and publisher links and synthesized thematically across taxation, subsidies, price regulation, distribution policies, and market supervision. The analysis integrated microeconomic mechanisms with institutional and Islamic economic considerations. Reviewed studies indicated that taxes, subsidies, and reference prices can modify production incentives, transaction prices, traded quantities, and the allocation of economic benefits. Carbon taxation raises questions concerning environmental externalities, fiscal revenue, and unequal household burdens. Subsidies may encourage production or cleaner technologies, but their welfare consequences depend on targeting, market structure, and public expenditure. Price ceilings can improve nominal affordability for some consumers while generating shortages or inefficient allocation when supply is constrained. Evidence from Indonesian commodity markets emphasized the importance of distribution arrangements, implementation capacity, and producer–consumer trade-offs. Islamic economic discussions stressed fair transactions, ethical supervision, and protection against harmful market practices. Welfare assessment should distinguish consumer surplus, producer surplus, government fiscal balances, and efficiency effects. Because the evidence differed in methods and sectors, the review offers a comparative synthesis rather than causal estimates or pooled welfare measurements.
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