Examples of Government
Regulation/Involvement in Your Life:
Taking a shower: The water that flows from your showerhead
has been analyzed by your local water department to be sure it is safe.
your teeth: A government agency assured that the
ingredients in your toothpaste are safe and that it was packaged safely.
The traffic laws that allow you to get to school safely have been
created and enforced by local government and police departments. Potholes
in the road have been filled by a company hired by the government.
to the radio: You can hear music clearly because a
government agency assigns a separate frequency to each competing station.
to School: National, state, and local government regulate
to Work: Government agencies assure that your workplace
and fund schools so we have an educated workforce.
is safe and protect you from discrimination.
- government control of an
prices, output, standards
- removal of government
rules, free market
Examples of Regulation
Communications Commission (FCC)
Civil Aeronautics Board (CAB)
Protection Agency (EPA)
Occupational Safety and Health
Reasons for Regulation
of production (economies of scale)
products/services will be available
Cost of Regulation
In most cases regulation tends to
RAISE prices and LOWER output!
Battle for the
1, Chapter 14: Deregulation Takes Off 7:29
Regulation of the
80’s: Economy was poor: high prices, high unemployment
Gov’t: What can we do to reverse this trend??
Airlines: Regulated since Great Depression
No new firms (no competition)
CAB: regulatory agency
Did not grant new routes
Kept prices high
Freddy Laker: Cheaper alternative!
PanAm Can’t compete with price
Kahn: Assigned to investigate effectiveness of CAB
Competition in industry
Prices of air travel
government regulations to increase
competition, lower prices
competition without social costs
(ex: health and safety requirements)
General Effects of
More competition= increase in output=
Market is free to compete