Government Regulation & Consumer Protection
what does the Price-Quality Model say
Consumers want low prices, high quality Businesses want high prices, low quality
Benefits of businesses regulating themselves 5
Demonstrates the ability of business to respond to the needs of consumers without government intervention Seeks to correct abuses by certain businesses Industry maintains a good image Saves taxpayer dollars Necessary - government could not regulate all business activity
When should governments regulate 2
Negative externalities or spillover costs Natural monopolies
Social responsibilities of business 3
Participate in the values, ideals, and beliefs of American society Pursue profits in a socially responsible and ethical manner Consumers demand that businesses behave more responsibly
Benefits of government regulation 3
Protecting consumers from health and safety aspects of products Protecting consumers from unfair treatment Promoting the availability of more adequate information
The common good is to keep the marketplace functioning for both businesses and consumers
Public Interest
involves products and services of fair or acceptable quality offered in the marketplace for a fair price
Public Interest
what does the Price-Quality Model have to do with
Public Interest
The prevention of physical or economic disadvantage or damage to the buyers and/or users of goods and services for personal or household use
consumer protection
Independent agencies - to who are they accountable?
legislature
A person who attempts to influence legislators and regulators to take a desired action, typically in favor of a special interest
lobbyist
attempts to influence legislators and regulators to take a desired action, typically in favor of a special interest
lobbyist
A group of persons that attempts to influence the statutory, regulatory, economic, and political decisions of government
special interest group
attempts to influence the statutory, regulatory, economic, and political decisions of government
special interest group
Situations when large corporations funding lobbyists can be bad
when corporations are focused on profit and and it conflicts with the benefit of society/consumers
Who pays costs of government regulation (~2)
100% of the costs of regulations are passed on to consumers Initial costs may be paid by businesses
Have legal rights to take actions affecting the rights of private individuals and organizations
Administrative Agencies
have the responsibility for carrying out the consumer protection policies
Administrative Agencies
monitors advertising in all media, including social media, to assure that advertising claims are truthful, accurate and not misleading
Advertising Self-Regulatory Council (ASRC)
Subprime mortgage crisis - who was responsible for this crisis?
Alan Greenspan Fannie Mae and Freddie Mac, the giant government-sponsored mortgage-finance companies Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed Securities
Economic role of business 4
Seeking profits Social responsibilities in business Public interest Regulation