Editing Government failure (section)

=== Distortion of markets ===
Taxation can lead to [[market distortion]]. They can artificially change prices thus distorting markets and disturb the way markets allocate scarce resources. Also, taxes can give people incentive to evade them, which is illegal. Minimum price can also result in markets’ distortion (i.e. alcohol, tobacco). Consumer would spend more on harmful goods, therefore less of their income will be spent on beneficial goods. Subsidies can also lead to misuse of scarce resources as they can help inefficient enterprises by protecting them from free market forces.

[[Price floor]]s and [[price ceiling]]s can also lead to social inefficiencies or other negative consequences. If price floors, such as [[minimum wage]], are set above the market equilibrium price, they lead to shortage in supply, in case of minimum wage to a higher [[unemployment]]. Similarly the price ceilings, if set under the market equilibrium price, lead to shortage in supply. [[Rent ceiling]], for example may then lead to shortage in accommodation.<ref name=":3" /> Other problems often arise as consequences of these interventions. [[Black market]] of labor and higher unemployment among uneducated and poor are possible consequences of minimum wage while deterioration of residential buildings might be caused by rent ceiling and subsequent lack of incentive for landlords to provide the best services possible.