Goverment Intervention For Increasing Competition And Protectign Workers Flashcards
What is a sme (example) and what are benefits of smes (amount)
- A sme is a small medium enterprise
An example is a local pizza takeaway - there are more smes so they employ more people
What is a start up (example)
- A start up refers to a business initiated by an entrepreneur which aims to develop into a scale bale business and further than the solo founder
- example of a start up is Uber and Airbnb
Why should governments support smes and start ups
By supporting smes and start ups -> it increases the amount of firms who rise to the challenge of competing with established firms -> this leads to increased competition which leads to benefits for the consumers
What benefits do sme and start ups provide for consumers
More competition which leads to lower prices, more choice and higher quality
Give an example of how supporting smes can be beneficial (audit)
Auditing in the uk is an oligopoly -> by supporting smaller auditing companies there is more firms who compete with the oligopoly which increases efficiency
What are the overall of benefits of smes and start ups
- provide competition -> increased efficiency
- more jobs and increased employment
- increased choice
- can be a seedbed for innovation
- may be more flexible and efficient into responding to consumer needs
What are some disadvantages of smes
- hard to get credit for finance -> small businesses are seen as risky borrowers so banks are reluctant to lend to them
- business skills -> many people believe that they do not have the business skills to operate a business
- recruitment -> hard to find competent employees
What can governments do to Support smes
- provide information
- deregulate to make it easier to enter markets
- streamline the process of setting up a business
- provide training for business owners
- educational reforms to increase the skills of overall workforce
What is competitive tendering
- competitive tendering is when private sector firms compete for contracts to carry out tasks on behalf of the government
- examples include catering for schools and constructing hospitals
What is the rationale behind competitive tendering
Competitive tendering brings back the profit motive to jobs previously done by the government with increased efficiency and quality -> tax payers benefit from lower prices and higher quality services
What are the benefits of competitive tendering
- if there is a competitive market for government contracts, more private sector firms will be responsible for allocating resources into the economy -> increased efficient and lower prices and higher quality
What are some disadvantages of competitive tendering
- if governments focus too much on the price aspect of contracts -> firms may lower quality of projects which will lower tax payers
- there is also Normally a lack of bidders
What is privatisation
Privatisation is the process of when public sectors companies change over to the private sector. This change is enacted by the government
What is the rationale behind privatisation
Privatisation brings back the profit incentive and competition which leads to increased efficiency and higher quality products
What are disadvantages of privatisation
- governments lose out on a source of income
- some things such as infrastructure are better off under state provision
- privatisation with poor regulation and a natural monopoly situation may lead consumers worse off -> example of this is higher prices in energy markets and railways
- less attention is paid to social objectives