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