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Transcript of Government Regulation
Role of the Government
How to allocate goods and services:
affect on consumers and producers
why does the government regulate the marketplace??
1. Have you ever tried to start your own business? What obstacles did you face?
2. How might government regulations help businesses and/or consumers? How might regulations hinder them?
Price – whom ever can pay for it
ex: want a banana? you must pay for it
Authority – decisions made by central authority; allows quick action
ex: Congress passes income tax
Lottery – random selection
ex: draftees picked by lottery
Force – use of threats & enforced by military/police
ex: military draft
First Come, First Serve – front of the line; inefficient b/c time spent in line
ex: Driving Test used to be by order
of arrival. Black Friday sales
Majority Rule – vote to decide how to use FOP
ex: Public Parks
Personal Characteristics – need or merit; can be barriers to certain groups
ex: Exclusions based on race
Contest - given to the person who "wins".
ex: run race, academics, test of skill
1) Provide public goods
items the Private market is unable to provide
Paid for with taxes (TNSTAAFL)
Shared Consumption – consumption by one doesn't keep another from also enjoying it
ex: Interstates (not an ex: gum)
Non-Exclusion – difficult to keep people unwilling to pay from enjoying it
ex: National Defense
~ Results in Freeriders – people who use/abuse,
but don’t pay for
Role of Gov't
2) Redistribute income
Taking tax money from one individual and giving it to another
ex: Social Welfare Programs,
Unemployment, Social Security
Role of Gov't
3) Protect Property rights
must protect so people are willing to invest
ex: Intellectual Property – copyrights &
Role of Gov't
4) Resolve Market Failures
when the private market can't ensure that marginal benefits exceed marginal costs
Gov't tries to correct negative externalities and support positive externalities (externality: side effect)
ex: pollutions cause someone to get sick -- negative externality
ex: your roommate plays your Spotify playlist -- positive externality
Goal of Gov’t: provide for health & safety of citizens & businesses
Increased Regulations protect citizens & help businesses recover
ex: Law on information companies provide to consumers
- publishing nutritional information; Credit Card companies must publish info on how long it will take to pay off loans
Deregulations – getting rid of existing regulations
~ more freedom,
~ but no guarantee of quality
ex: utilities companies - you can now choose between more than 1 phone company for services