AQA ECONOMICS GCSE UNIT 12: Regulation of Dominant Firms

Created by: Megan Foxen
Created on: 30-05-13 14:44


	AQA ECONOMICS GCSE UNIT 12: Regulation of Dominant Firms
	Advantages To Increase Competition -> A dominant firm may be able to fix the prices of goods and therefore stunt the advantage to consumers of competitive prices and price wars To Increase Market Efficiency -> If the financial resources are not being allocated efficiently then the market is likely to fail as a result of negative externalities and lack of competition To Enforce Fair Practice -> Many dominant firms put power before consumers therefore the quality of the goods/ services will fall in contrast to the rising prices	Disadvantages Expensive to run Laissez- Faire Attitude -> If the government enforces this approach to private firms/ individuals then a free market will occur which will result in high competition and lower competition prices Have Little Power -> Regulators do not have a lot of power over dominant firms. Consumer pressure has more power over the behaviour of dominant firms
	Evaluation The OFT recommends regulation to the COMPETITION COMMISSION and the competition commission investigates and enforces changes. The Competition Commission investigates:= Market Investigations; e.g Car insurance being cheaper for females than males= Merger Inquires; They may allow the merger to take place, but may restrict the amount of money spent on advertising. A merger is automatically referred to the competition commission if the market share is over £70 billion e.g. Barr and Britvic merger is being investigated as it will reduce the consumer choice

AQA ECONOMICS GCSE UNIT 12: Regulation of Dominant Firms

Advantages

To Increase Competition -> A dominant firm may be able to fix the prices of goods and therefore stunt the advantage to consumers of competitive prices and price wars
To Increase Market Efficiency -> If the financial resources are not being allocated efficiently then the market is likely to fail as a result of negative externalities and lack of competition
To Enforce Fair Practice -> Many dominant firms put power before consumers therefore the quality of the goods/ services will fall in contrast to the rising prices

Disadvantages

Expensive to run
Laissez- Faire Attitude -> If the government enforces this approach to private firms/ individuals then a free market will occur which will result in high competition and lower competition prices
Have Little Power -> Regulators do not have a lot of power over dominant firms. Consumer pressure has more power over the behaviour of dominant firms

Evaluation

The OFT recommends regulation to the COMPETITION COMMISSION and the competition commission investigates and enforces changes. The Competition Commission investigates:= Market Investigations; e.g Car insurance being cheaper for females than males= Merger Inquires; They may allow the merger to take place, but may restrict the amount of money spent on advertising. A merger is automatically referred to the competition commission if the market share is over £70 billion e.g. Barr and Britvic merger is being investigated as it will reduce the consumer choice

Comments

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AQA ECONOMICS GCSE UNIT 12: Regulation of Dominant Firms