What is market distortion?

Market distortion is a term used to describe a situation where there is a certain disturbance on the market, which is due to factors other than the normal effects of perfect competition. These distortion are usually the product of some government actions that serve the purpose of interrupting the normal flow of market forces. Market distortion can create a government for a specific reason; However, such market distortion can lead to a situation where market fails in the affected economy. Some of the examples of tools used in creating market distortion include imposing fees and import and export fees, creating import quotas or export quotas, creating fixed prices and using subsidies.

market distortion example can be seen in a situation where the country of the country increases tariffs on certain products with different effects. The result of such market distortion could be a sharp increase in the price of imported products, which will be handed over to consumers. TheirAnother way in which such a policy could affect the market could be in the form of an increase in underground markets, because importers and consumers are looking for cheaper alternatives, although these alternatives come from illegal activities such as smuggling goods into the country. For example, if the government should increase the overall obligations to imported chicken, such a policy could cause importers to seek further resources to smuggle chicken into the country. The same may happen if there are import quotas limiting the amount of a specific item that can be imported into the country during the specified period.

Another factor that could lead to market distortion is the use of price controls to create artificial conditions on the market. In such a case, the price control of price control would be to determine the price for the products mentioned, which is equivalent to interference with the common processes of demand and supply that occurs naturally, creating market distortion. For example, the government could set a maximum price for selling oil products DistribUtory, which means that it has set the ceiling at the cost of such a product that distributors must not exceed.