| What do Publicly Owned Firms aim for, and why may it be Inefficient? | -Firms/Industries owned by the Government will act towards the Best Interests of the Population. Low Prices and High Output
-But the lack of Competition can result in Market Failure. This is the concept behind Privatisation |
| What is Privatisation? | -When the Ownership of a Industry/Firm goes from the Public Sector to Private Sector |
| What would Privatisation Cover? | -Sale of Public Firms: Royal Mail was Privatised via Sale of Shares
-Contracting out Services. Government pays Private Firms to carry work out on the government's behalf
-Competitive Tendering: Private Firms will Compete/Bid to get a Contract, and compete on Price and Quality
-Public Private Partnerships (PPP) is where Firms work with the Government to Provide/Build something for the Public. |
| What are the Advantages of Privatisation | -Increased Competition will Improve Efficiency and Reduce X-Inefficiency
-Resources Allocation more Efficient, as Market Signals determines Supply and Demand
-PFIs allow Important Buildings to be made that may be Unaffordable for the Government
-Furthermore PFI allows Lower Taxes in Short Run - Governments don't need to pay for it
-Revenue is Gained from Government selling Firms |
| What are the Disadvantages of Privatisation | -Privatised Public Monopoly will most likely become a Private Monopoly, so there needs to be Extra Measures to Ignore This
-Privatised Firms may care less for Safety and Quality and Society, because they want to Maximise Profits
-Regulating may be needed to Prevent a Private Monopoly from occurring
-PFI can cost More in the Long Run, adding to Government Debt and not being Completely Worth It
-PFI may furthermore mean Higher Taxation for the Future to Pay of, due to the cost of Leasing it |
| What is Regulation? | -Rules enforced by an authority and is backed by Legislation so that Legal Action can be Taken.
-Used to Control the Activities of Producers and Consumers and create a more Desirable Environment |
| Where can Regulation help? | -Reducing the Usage of Demerit Goods - Banning or Limiting
-Reducing the Power of Monopolies - Price Caps
-Protection for Consumers and Producers against Asymmetrical Information - Consumer Rights Act
-Reducing the Damage to Third Parties/Environment - Clean Air Act and Environment Protection Act |
| Why can Regulation be Hard to Set up | -Difficult to find an Acceptable Level of Regulation
-Some Areas need Worldwide Regulation, such as Emissions
-Excessive Regulation can Increase Prices and can lead to Firms leaving
-Monitoring is Expensive for the Government, and the Punishment, if not hard enough, can not be a Deterrent |
| How has Regulation been used in Britain to Encourage Renewable Energy | -The Renewables Obligation Certificates (ROCs) have Encouraged the Usage of Power made from Renewable Sources
-Electricity Suppliers had a Given minimum % of Power that had to come from Renewables Sources
-Firms that made Renewable Energy were given ROCs Linked with the amount of Renewable Energy made, which can be Sold to Suppliers
-Those Suppliers that failed to Reach the % had to pay a Financial Pay, which was distributed with Suppliers that Reached the % |
| What is Deregulation? | -Removing/Reducing Regulations. This can Barriers to Entry falling and thus can Increase Competition in Monopolistic Markets in Particular |
| What are the Advantages of Deregulation? | -May Improve Resource Allocation. Because Deregulation encourages Lower Barriers to Entry, it can allow for a more Contestable environment. The Threat of Competition thus means Prices fall Closer to MC and Output Increases
-Used alongside Privatisation of Public Monopoly to Prevent the Privatised Monopoly becoming a thing
-Reducing the Red Tape and Bureaucracy, which means less money |
| What are the Disadvantages of Deregulation? | -Difficult to Deregulate Natural Monopolies. For example Utilities: Need Large Infrastructure which can be Expensive to Build and Maintain, and should only be one of them
-Deregulation may not fix Market Failures - still a need to tackle Negative Externalities, Consumer Inertia, Immobile Factors of Production
-Deregulation may lower Safety and Protection for Consumers |
