general + government role in regulation Flashcards
(20 cards)
Benefits of Privatisation
Increased government revenue and increased incentive for privatised firms.
Problems with Privatisation
Private sector monopoly, excess profits, and privatised firms may have been sold off to foreign countries.
Regulation
Aims to mimic or create the conditions that firms would experience in a competitive market.
Pricing formula
(RPQ-x) where x is set by the regulator. (RPI-x)% is the maximum a firm can raise their prices by, valid for 5 years. Incentive for X efficiency to increase profits.
RPI+K
k is for capital; industries that need to increase quality, basically consumers also contribute to subsidy.
Firms become
Price takers.
Performance Standards
Ensures quality isn’t cut when prices are cut.
Deregulation
The cutting back of federal regulation of industry.
How do gas/electricity companies attract customers?
Loyalty schemes, gas and electricity bundles for discounts, advertising, smart meters (price discrimination), and long-term contracts.
How to promote small firms (competition)
Deregulation - minimum price to reduce predatory pricing, tax breaks, education and training, and government underwrites loans.
Contracting out
Bid; private firm that offers the lowest price gets a contract for a certain amount of time. Bid rigging.
MRPl
Price x Marginal Product of labour.
Factors affecting labour elasticity of demand
Ease of substitutability of capital for labour, time (the easier it is to fire someone, the more elastic D), PED of final product as derived demand, and proportion of labour costs to total costs.
Human Capital
The stock of all accumulated education, training, skills, and experience that an individual has.
Cognitive skills
Reasoning/logic and using knowledge.
Manual skills
Hand-eye coordination and licenses.
Specific skills
Skills needed for the workplace.
Generic skills
Charisma, time management, IT.
Factors affecting elasticity of labour supply
Availability of suitable labour in other industries, length of training period, and vocationalism.
Labour market flexibility
The labour market is considered flexible if it can adjust fast and fully to changes in labour demand and labour supply conditions.
