Unit 12: Reasons For Regulations Flashcards
What is externality?
An externality is the result of the business activity that is not taken into account in normal business decision making. Or in other words it is the external effect of a decision.
What are private and social benefits and costs?
Private costs and benefits are to the business itself aka the owners of the business.
Social costs and benefits are to their customers and others in the community.
What are positive and negative externality?
A positive externality is a favourable effect.
A negative externality is a damaging effect.
What can be the negative externality?
- Pollution, congestion from too many vehicles or sound pollutions.
- Obesity and lack of fitness from eating too much of the wrong type of food.
- Greenhouse gas production
- Exploitation - like the business paying low wages.
What is the role of the government in dealing with externalities?
The government is to make sure that businesses are made accountable for their negative externalities.
What are the two types of governmental objectives and give examples?
-Economic objectives:
+To make sure that more people have jobs.
+To protect consumers and businesses
+To make sure that economy grows
-Social objectives:
+To make sure that all children are educated in school
+To look after the health and wellbeing of the citizens
+To protect the local, national and international environment.
What are the types of government intervention?
- Public provision of goods and services
- Legislation
- Taxing and subsidising
What is nationalisation and privatisation?
Nationalisation: The government taking over the business
Privatisation: The switching businesses from government ownership to private ownership.
What is regulation? What is the effect of regulation?
Regulation is creation of rules and laws by the government. Too much regulation would limit the freedom of businesses to make decisions. Too little regulation can lead to abuse (for examples of employees).
What is legislation? What types of legislation are there?
Legislation is the creation of laws. There are national and international laws.
How are laws implemented?
Governments create laws governing business activity => Local/National/International government legislation => creates laws controlling => Local/National/International business activity => upheld by Local/National/International courts
What are other agencies that can intervene to stop social and environmental harm by businesses?
- Trade Unions
- Pressure groups
