regulation

Question 1

evaluate regulatory capture

Answer 1

1. if regulation is numerous, complex or there is a market with a large profits, there is always a risk of regulatory capture
2. Regulatory capture is an economic theory that says regulatory agencies may be dominated by industries or interests that are charged with regulation
3. This results in agencies acting in public interest instead of acting in ways that benefit the industry is regulation
4. This is likely to occur if there’s a asymmetrical information in the industry
5. Asymmetrical information is a situation in which some participants in the market have better information about market conditions than others
6. Regulatory capture is a limitation to regulation as a policy.

Question 2

analysis of regulation graph

Answer 2

1. some regulation increases in the cost of production
2. this causes a leftward shift in supply S1 to S2 due to less willingness and ability
3. Cost of complying with regulation made me market price rises P1 to P2
4. Aims to solve the problem of overall consumption and overproduction
5. Quantity decreases, Q1 to Q2
6. Contraction in demand.
7. Therefore, should correct market failure to make the market more allocatively efficient

Question 3

global agreement para

Answer 3

1. however, for stricter regulation to be effective global agreement may be needed.
2. if carbon emissions are regulated in one country alone, the effect on global emissions will be too small to have a significant effect.
3. For example, in 2020 the EU will introduce stricter regulation to increase water, quality and reduce pollution
4. However, the French government are concerned about potential negative externalities to citizens.
5. however, to be effective, he requires non-EU countries that share the same waterways to uphold similar regulations
6. Which shows how global agreement upon stricter regulation is essential to tackle big challenges, such as environmental market failure

Question 4

Government, failure and a law of unintended consequences para

Answer 4

1. however, law of unintended consequences could rise as a form of government failure
2. But government intervention to correct market failure lead to further misallocation of resources.
3. For example, the rise in price as a result of strict regulations could increase the price higher than expected.
4. As firms cost of production may rise if they are to produce a higher quality product.
5. Consequently, the government intervention could incentivise consumers to turn to the black market
6. Countries with less strict regulations can lead to further negative externalities such as criminal gang profits increase
7. However, such a problem could be a counter for policies such as indirect tax and subsidies as well.

Question 5

list evaluative paragraphs for regulation

Answer 5

-Government, failure and law of unintended consequences
- Regulatory capture
- Global agreement