4.2.3 Arguments for and against regulation

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    BENEFITS OF REGULATION

    • There is a consumer surplus, as goods and services are provided at a lower price
    • There is a minimum quality level reached, and ensures products are safe to use, and there is more innovation.
    • Helps improve quality of life for customers and employees, through better products and wages respectively.
    • If regulation is co-ordinated, then there will be fair rules for all businesses.
    • The flexibility of labour markets in the UK has resulted in lower levels of unemployment and more job creation

     

    DRAWBACKS OF REGULATION

    • Regulation can increase the costs ad make it harder to do business.
    • It becomes more expensive to create a safe working environment for employees as well as pay them higher wages.
    • If firms are not able to collude they will be less capable of increasing market power.
    • They will compete on price more which cuts into their potential profits.
    • Governments have to spend money to regulate firms (ultimately paid by consumers through tax.

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