Why regulation is needed?

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Why do consumers need protecting?
The aims of consumers and producers oppose eachother very much.
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What do consumers want?
Low prices, high quality, innovative goods and good service.
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What would producers do if left to themselves?
They may try to avoid all the things consumers want as they take time effor and money
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What do producers really wnat?
Weak competition so they can concentrate on profit
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What is market power?
The ability of a producer to exert some level of control over a market.
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How can a producer use its market power?
Setting prices, restricting output, influencing other producers creating barriers to entry and influencing suppliers
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What is consumer sovereignty?
When the consumer has control. The buying decisions of the consumer dictate what is produced in the market.
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What does consumer sovereignty and healthy conpetition bring?
Increased standards of living, lower prices, more choice, innovation, better quality and service.
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How does healthy competition benefit the ecnomy?
Resources are used more efficiently, productivity increases and businesses compete more internationally increaseing imports and exports.
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What is public interest?
The wealfare and wellbeing of the public in general, as opposed to the selfish interests of individuals, groups and businesses.
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How do businesses become powerful?
Economies of scale help to grow businesses and create barriers to entry, adopt predatory pricing, grow organically or inorganically.
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What is a cartel?
An agreement between businesses to reduce competition or to avoid competing with each other and increase prices. The agreement is usually secret.
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What are the effects of cartels?
Damage the wider economy by removing the incentive to to operate efficiently and to innovate
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What can cartels agree on?
Prices, output levels, doscounts and credit terms, preferential supply, bid rigging.
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What is market sharing?
When cartels divide up the market so each member has their own area and others don't intrude or compete.
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What is preferential supply?
Restricting the number of customers they supply so the product is more exclusive making prices increase.
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What is bid rigging?
Cartel members pretend to compete to win contracts but take it in turn to offer the lowest bid. This means they can charge much higher prices.
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Why might cartels restrict output?
To restrict supply to prices increase
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What is tacit collusion?
When a competing firm appears to follow a similar strategy to reach the same aim, such as avoiding price cutting, but without meeting or having an agreement.
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What is explicit collusion?
Occurs when there is a meeting or agreement to follow a joint strategy like price fixing
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What are restictive practices?
Any action that a business migh use to restrict competition
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What can a business do to restrict competition?
Force retailers not to stock a competitiors products, refusing to supply retailers who discount products, full line forcing, exclusive dealing, resale price maintenance.
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What is full line forcing?
When retailer are forces to stock a full range of a suppliers goods rather than just the best selling ones.
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What is exclusive dealing?
When a supplier requires or induces a customer to deal only or mostly in certian products
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What is resale price maintenance?
Suppliers force retailers not to discount prices
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What is the impact of restrictive practices on consumers?
Disposable income will reduce and so will standard of living, may not have the same range of choice, products may lack innovation
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What are the consuqences of restrictive practices of businesses?
Increase profitability, aren't as efficient, weakens competitiveness in international markets
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What is a natural monopoly?
Occurs when the most efficient scale of production is a monopoly because more than one producer would involve wasteful duplication of resources.
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Which industries are natural monopolies?
Railways, power distribution, water supply
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What are the problems with natural monopolies?
Prices may rise, innovation may be no-existent,
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What is a regulatory body?
A public authority or regulatory body responsible for exercising control over a sphere of business activity. There main priority is protecting consumers.
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Card 2


What do consumers want?


Low prices, high quality, innovative goods and good service.

Card 3


What would producers do if left to themselves?


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Card 4


What do producers really wnat?


Preview of the front of card 4

Card 5


What is market power?


Preview of the front of card 5
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