Regualtion Flashcards
1
Q
What does regulation mean ?
A
Laws passed and enforced by government
2
Q
Regulation evaluative points
A
Government requisites accurate and up to date informations therefore risk of govement failure
Opportunity cost of monitering and policing
Can be ignored and lead to black market
Punishment needs to be an effective deterrent
3
Q
How regulation works
A
Increase firms cost of production
Supply curve shift left (s1-s2)
Price Rises (p1-p2)
Contraction of demand
Quantity decrease (q1-q2)
Solving problem of overconsumption or overproduction
Making market more allocatively efficient
Reduce welfare loss to society
