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The Role Of Government In The Economy - Coggle Diagram
The Role Of Government In The Economy
Promoting a Stable Market
What is a Monopoly?
A monopoly is when a certain company has complete control over how a product is being supplied or how a service is being provided
Why are monopolies bad?
Monopolies create a lack of drive to make a better product since there is no competition. If a company has a monopoly it can set the price of something at whatever they choose.
An example of a monopoly would be De Beers Consolidated Mines. This company once had control over a majority of the diamond market. They earned control by outpricing their competitors. Once they outpriced all these companies, the price became in their hands. They had control on the supply of diamonds so they could create ‘artificial scarcity*’ to increase the demand and drive up the prices.
6.9B
Labour Laws
The government ensures that employees have worker rights such as: Proper notice for termination, limit on weekly work hours, minimum wage, mandatory breaks and rest periods, youth labour laws, and the right to refuse unsafe work.
Labour laws are laws that protect worker and employee rights. The government enforces occupational health and safety standards, they conduct workplace inspections, and they investigate workplace accidents and injury.
Prevent Price Fixing
Price fixing occurs when several similar companies agree to inflate the price of their goods or services to increase profits. Price fixing goes against the law of supply and demand by in a sense creating a oligopoly.
An example of this would be if shell, esso, and petro-canada agreed to increase their fuel prices by the same amount to make more profit.
Drawbacks of Government Involvement in the Economy
Government organizations sometimes have a reputation for being inefficient and wasteful. Government employees are often well paid and have good job security. This can lead some to become lazy and inefficient at their job. That is our tax dollars paying their bloated salary! Private companies run on profit so finding efficiencies makes you more competitive and profitable.
Governments wield a lot of power and are privy to information outside of the public sphere. It is against the law for government officials to use private information to gain profit, this is called insider-trading. Recently a group of US senators sold a significant part of their stock portfolio after a private briefing about the damage COVID-19 would do to the stock market.
Crown Corporations
Crown Corporations are usually created to fulfil a need that would not make any profit for a private company. An example of this is electric and water infrastructure in towns and cities.It would take decades for a private company to earn a profit after the initial investment of building the required infrastructure. The government instead uses tax dollars to create this infrastructure for people.
Crown corporations are wholly owned federal or provincial organisations that are structured like private or independent businesses. Some examples are CBC, Canada Post, and Bank of Canada.
Some crown corporations exist to promote Canadian culture and identity.The CBC is one such example. It is completely government funded and creates 100% Canadian content. The CRTC (Canadian Radio-television and Telecommunications Commission) ensures that television and radio companies must play a certain amount of Canadian content.
Sometimes a government will think it is a good idea to sell a crown corporation to the highest bidder and privatise it. This can be done for several reasons but typically it is cost and in some cases the privately run company is more efficient and cost-effective. Some privatised crown corps include Air Canada, Petro Canada, and Canadian National Railway.
Ensuring the Safety of the Consumer
Health canada sets safety regulations for buisnesses to follow that produce goods for human consumption. They require companies to clearly display the nutritional value of a food on its packaging. They even require cigarette companies to clearly warn people of the potential harms.
Companies like the Canadian Standards Association (CSA) and the Consumer Product Safety Commission (CPSC) ensure that products meet industry standards for safety.
If a product passes all safety tests it is usually trusted in the market, however, the government agencies responsible for consumer safety cannot oversee all production. Sometimes, products slip through and enter the market that is not safe. If they do, the government can force the company to issue a recall on that product. A recall allows the consumer to have their purchased good repaired for free or get a refund.
Enviromental Protections
Some companies and businesses care more about profit than environmental sustainability, and if left to their own devices, they would pollute freely in the name of maximising profit.Government agencies ensure that companies meet environmental protection standards.
Environment and Climate Change Canada informs Canadians about protecting and conserving our natural heritage, and ensuring a clean, safe and sustainable environment for present and future generations.The department regulates industry through acts such as the Canadian Environmental Protection Act, 1999 (CEPA 1999).
An example would be how Forestry companies usually harvest trees from public or ‘crown’ land. After they clear the trees off the land they must pay to have the land replanted with trees to ensure the sustainability of our forests.