Here are the 10 key steps that lobbying businesses will follow to bend government to their will. Defining characteristics of SOEs are their distinct legal form and operation in commercial affairs and activities. The government was made to regulate politics. In order to safeguard the interest of the community government may ban or limit the production of certain goods and services. To achieve a favorable balance of payments. The government may regulate business activities through licensing/ensuring standards/Legislations which help to control the business activities in the economy. Reasons why the government regulates Business activity, Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Quick NetOne, Telecel, Africom, And Econet Airtime Recharge, on Reasons why the government regulates Business activity, O Level Computer Science: Software: Operating Systems: Personal Computers, O Level Computer Science: Software: Operating System, O Level Computer Science: Hardware: Point Of Sale Terminal, O Level Computer Science: Hardware: Automated Teller Machine, O Level Computer Science: Hardware and Software: Introduction. Moreover, Goods which harm the environment are also totally banned or strictly controlled in many countries, e.g. Subsidies are used to encourage production and consumption which is particularly relevant in the case of merit goods and products that generate positive externalities. By John Steele Gordon. Sale of Goods Act: It is illegal to sell products with serious defects or problems and goods sold should match to the description given. This State may do this in order to: To raise taxes to fund its public spending as well as other government operations. The result is a loss of economic and social welfare. This is usually because the benefits that the free-market confers on individuals or businesses carrying out a particular activity diverge from the benefits to society as a whole. For example, selling of guns, explosive and dangerous drugs are illegal in many countries. Negative Externalities: Consumers and producers may fail to take into account the effects of their actions on third-parties. To prevent strategic technology from falling into the hands of rival states. When people refuse to contribute to the cost of providing a public good on the grounds that once it is provided no one can be barred from using it. Demerit goods: restrictions on the sales of tobacco products and alcohol. Business-to-government (B2G) is a business model that refers to businesses selling products, services or information to governments or government agencies. He holds an Honours in Accountancy degree from the University of Zimbabwe. There is no unfair discrimination on the basis of Race, religion, sex, age, or color. If anything goes wrong, chat with us using the chat feature at the bottom right of this screen. This can be seen in occasions where there is either a surplus or a shortage of labour, as well as cases where workers are in the wrong jobs, workers are poorly or not trained at all, and where wage rates are low. In 1649 the British Parliament passed the Navigation Acts to regulate trade with and within the North American colonies. But for present purposes the more immediate reforms began in October 1987 when the Minister for Finance (Senator Walsh) issued a policy statement titled Policy Guidelines for Commonwealth Statutory Authorities and Government Business Enterprises. i. Business cannot fire the workers because they have joined a trade union or for being pregnant. To prevent the formation of monopolies and check their power. It's because of you guys that I topped Business and Economics in … If government would confine its activities regarding business to … Colonial Americans north of Maryland profited from a thriving trade with other colonies in North America and the West Indies. Claims that government intervention and regulation in business will promote ethics have become a common argument. It’s got some baggage attached to it. Merit goods: Markets may fail to produce enough merit goods, such as education and healthcare. Information Failure: Government action can have a role in improving information to help consumers and producers value the ‘true’ cost and/or benefit of a good or service and this is done by: Compulsory labeling on cigarette packages with health warnings to reduce smoking, Improved nutritional information on foods to counter the risks of growing obesity, advertising campaigns to raise awareness of the risks of drink-driving. The government plays a variety of roles in business primarily to ensure that the public's interests are preserved and to control any and all market failure. Government may pass laws to protect the interest of employees such as: Laws against unfair discrimination at work and when applying for jobs. To prevent the formation of monopolies and check their power. There are several reasons why the State might intervene in business affairs and regulate businesses. Why Government Intervenes In Business Activities Economics Essay The government plays a variety of roles in business primarily to ensure that the public's interests are preserved and to control any and all market failure. The advantages of government involvement in business activities is that it helps regulate the prices of commodities as well as ensure only quality products are in the market. Public goods: Markets may fail to form, resulting in a failure to meet a need or want, such as the need for public goods (defense, street lighting, and roads). Government regulations can protect consumers and help businesses thrive at the same time, but they can also reduce efficiency and limit innovation. For example, the environment protection agency handles Central Bank, Food and Drug Administration, Labor Commission, Securities, … By 1764, however, England had incurred significant war debts, an… Any market economy necessitates some collective authority in order to enforce property rights and to make sure that people execute contractual responsibility. ALLOCATIVE ROLE: The government must determine how some resources are allocated. Markets may also fail to control the manufacture and sale of goods like harmful products such as cigarettes and alcohol, which have less merit than consumers see. The existence of monopoly power is often thought to create the potential for market failure and a need for intervention to correct for some of the welfare consequences of monopoly power. To internalize the social costs of businesses. In many countries, government makes it obligatory to have a written contract of employment. Charalambous Tower Monopoly Power: Markets may fail to control the abuses of monopoly power. The classical economic case against monopoly is that, Price is higher and output is lower under monopoly  than in a competitive market, This causes a net economic welfare loss of both consumer and producer surplus. In the recent years government across the globe have passes legislations to control business activities from harming the environment. There will be no phased reopening next year. There two major forms of government in Zimbabwe: The local governments in the form of councils either urban or rural, There are other laws which apply by virtue of treaties, SADC regulations, the African Union and United Nations. Address: Cyprus Headquarters Government laws regarding trade, operations, and transactions are implemented and incorporated in many business laws. A state-owned enterprise (SOE) or government-owned enterprise (GOE) is a business enterprise where the government or state has significant control through full, majority, or significant minority ownership. Workers get adequate breaks between shifts. It’s not a good label. Indirect tax: to discourage production of demerit goods and others services that produce negative externalities. The recent business bailouts are the start of government control of businesses. The British, who exported cotton from the southern colonies, dominated commerce in that region. Many times in order to get more profit the business might neglect issues like environmental issues and production of harmful and dangerous products. Market failure exists when the competitive outcome of markets is not efficient from the point of view of society as a whole. This is because it is very hard to gain enormous profits without the legislative policies always being in your favor. During the first one hundred years these trade laws were in effect, the British did little to enforce them. This basic statement assumes that it is possible to arrive at a collective judgment as to the desirable income distribution. However, such government actions have consequences that provoke an equal, opposite negative reaction which negates any positive effects. Allocating funds gleaned from taxes also allows the government to create jobs or public venues. Cyprus, Copyright © 2020 UniAssignment.com | Powered by Brandconn Digital. DISTRIBUTIVE ROLE: The free market outcome results in an unfair distribution of income, so the government will intervene to assure everyone has a sufficient income. It concerns the use of budget deficits or surpluses to add to or subtract from aggregate demand in the economy, with the intention of influencing the level of output and unemployment and the rate of inflation in the economy. This unlimited prosperity of these enterprise entities has caused people to wonder whether these organizations can influence government decisions. STABILISATION ROLE: The government intervenes in the market to ensure there is steady growth. By the way, government control of business has a name. Often market failure results from consumers suffering from a lack of information about the costs and benefits of the products available in the market place. Explain four methods used by the government to regulate business activities . The government intervenes in business practices as a means of controlling the way that businesses operate against each other. Why Government Can't Run a Business Politicians need headlines. Flat M2 The government takes keen interest in training people to understand the business activities through Kenya Business Training Institute (KBTI) iii. Control Activities: Control activities are the actions established through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out. A merit good is a good that society or the government deems that people ought to have because it is considered to be good, consumption is encouraged. Licensing:Gives the business people authority/permission to carry out business activities legally Fixing quotes :quantitative restrictions on goods that should be … Market failure occurs when freely-functioning markets, fail to deliver an efficient allocation of resources. The government provides the business an opportunity and legality to earn profits in return for taxes. That’s right, there’s a name for it, it’s already been labeled. 1. Labour Market Failure: occurs when supply and demand don’t result in an efficient allocation of labour resources. Some of the tax revenue are use to finance merit goods and public goods, such as education and health. To prevent the dumping of toxic chemicals into rivers or populated areas, To promote the development of under developed areas. It encloses the details of the wage rate; working hours, deductions and other necessary details concerning working conditions. To protect workers from dangerous equipment. Government control over business activity Business activity produces goods and services which people wish to buy. To implement legislation, the government generally creates special agencies to monitor and control certain aspects of business activity. The regulation of business activities like import and exports, foreign exchange and etc., through Imports and Exports (Control) Act, COFEPOSA, FERA and FEMA. There should be proper notice before dismissing a worker or else it will be treated as unfair dismissal. Apart from that the Government has 4 distinctive role: REGULATORY ROLE: The rules that are established to make the market system work efficiently. The Imports and Experts (Control) Act, 1947 amended from time to time empowers the government to prohibit or control imports and exports in the public interest. Answers. In either case, the plan is to bring monopoly price to the competitive level. ii. B2G networks or models provide a way for businesses to bid on government projects or products that governments might purchase or need for their organizations. To prevent racial, gender and other forms of discrimination. To access more topics go to the O Level Business Notes page. This includes high (possibly excessive) amounts of spending on persuasive advertising and marketing. A massive thanks to the Dinesh Bakshi team for putting up resources that have made my Business and Economics life across IGCSE, AS and A level much more interesting, fun and a point of so many wonderful memories. De-merit goods: A demerit good is a good that government or society considers being harmful or bad for people. Information Failure: Markets may not provide sufficient information because, during a market transaction, it may not be in the interests of one party to provide full information to the other party. Those areas, and their accompanying regulatory agencies, include: 1. While there are many highly specialized types of government regulation on businesses in the U.S., some broad categories apply across most if not all areas of business. Third-parties are individuals, organisations, or communities indirectly benefiting or suffering as a result of the actions of consumers and producers attempting to pursue their own self interest. 32 Stasicratous Street The government also determines the minimum wages paid to different types of workers. Government regulation is much maligned in business circles. The government should stay away because it always try to help poor people who can't and don't do anything meanwhile penalizing the rich for being financially successful (70% tax for the richest Americans). Government Intervention in a Market Economy . Consumer Protection legislations, under which we have: Trade Description Act: deliberately giving false impression about a product is illegal. Answers. In this situation private producers will have no incentive to produce the goods as they have no way of charging for the product so they can’t make a profit. To ensure that wealth is equitably distributed. It is a very crucial question in the world of business and also society at large. To raise taxes to fund its public spending as well as other government operations. Government regulation on marketing and advertising: Every business in the United States must comply with truth-in-advertising laws regulated by the Federal Trade Commission (FTC), as well as comply … Proper hygienic conditions and washing facilities are provided. The allocative function refers to how much of the government’s budget will be allocated to particular projects. Nicosia 1065 He is passionate about technology and its practical application in today's world. School begins on 4 January. Apart from that the Government has 4 distinctive role: Companies were made to regulate business. In this age of globalization, firms with immense wealth accumulatio… They do this through monetary and fiscal policy. Executives need profits. The government can also bring down monopoly price to competitive level by price regulation and taxation. Why government control business activity Production of certain goods and services: Governments can pass laws to restrict and ban certain dangerous goods such as: Workers should be provided with proper safety equipments and clothing. Many would consider the United States to be a market economy, despite its heavy levels of government control and regulation. Rent seeking behaviour by the monopolist might add to the standard costs of monopoly. aerosol cans that use CFCs which has been banned because of their damaging effect on the ozone layer. To protect local industries from foreign competition. Business might use media to portray a wrong image of their product or may even mislead customers to buy products. For example, the government may decide that, as part of their economic policy, it needs to spend more money on developing collective goods such as roads, education and health care. Large business might take the advantage of their size and exploit consumers, employees and even use unfair tactics to overcome competition from small businesses. Government receives a great deal of its tax income from businesses. A lot of big corporations have been prospering over the years untouched with any unfavorable legislative policies. In the absence of such an agreement, government intervention may aim at several different targets including providing a floor to income, increasing equality of opportunity, equalizing incomes and increasing incentives of individuals. Businesses are usually profit motivated. Reasons why governments intervene in the affairs of business. Government economic policy, measures by which a government attempts to influence the economy.The national budget generally reflects the economic policy of a government, and it is partly through the budget that the government exercises its three principal methods of establishing control: the allocative function, the stabilization function, and the distributive function. The government enforces control for the good of consumers, workers, local residents and the community. Consumer Credit Act: According to this act, consumers should be handed a copy of the credit agreement and should be aware of the interest rates, length of loan while taking a loan. A reasonable workforce temperature is maintained for workers. 3.All businesses are under the government’s control. Few modern markets meet the stringent conditions required for a perfectly competitive market. There are several reasons why the State might intervene in business affairs and regulate businesses. 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