3.6.2 impact of gevernment intervention

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Last updated 9:37 AM on 4/14/26
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5 Terms

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Impact on price

  • prevent monopolies charging excessive prices
  • make utilities more affordable
  • limiting increases on prices can make firms more efficient
  • HOWEVER if corporation tax is high firms may pass cost onto consumers- increasing prices
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Impact on Profit

  • if strict price caps investment could be limited since amount of profit made is restricted
  • recent fall in corporation tax from 21% to 20%- more profits
    EVAL- is 1% significant
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Impact on efficiency

  • may lead to increased economic efficiency since objectives change from profit max to social efficiency max
  • HOWEVER free market economists argue by operating in competitive environment firms are more efficient- private sector more efficienti
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Impact on Quality

Governments can ensure firms are meeting minimum targets

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Impact on choice

If gov regulate monopolies and encourage the start-up and growth of SMEs