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The Role of Government in the Economy - Coggle Diagram
The Role of Government in the Economy
Promoting a stable economy
How are they bad?
They can choose any price they want.
They create inflation
They can supply inferior products
There's a loss of incentive to innovate
An example of a monopoly would be VIA rail as they are the most dominant passenger railway. However, because Canada is a mixed economy it is difficult to find a true monopoly.
A monopoly is when a company has complete control over the supply of a product or service.
Ensuring the safety of the consumer
The CSA is an agreement between farmers and consumers where you may pre-pay for a portion of the farm's harvest, and receive regular deliveries of the fresh produce throughout the growing season.
Product recalls: Due to the government not being able to oversee all production, often times unsafe products slip into the market. When they do the government has the ability to make the company recall the product with the issue. When a product is recalled the consumer has the option to have it be fixed or be issued a full refund.
The role of health Canada is to set regulations for companies that produce goods for consumption by requiring clear display of nutritional value of food on packaging. There is also a requirement for cigarette companies to warn people of potential harm. Overall, they are responsible for the national health policy.
Environmental Protection
It is important because companies often use harmful things to make more profit. The government creates certain regulations to ensure that we prioritize environmental sustainability.
An example of a regulation set on pipeline companies is that they previously use coal tar enamel to coat the outside of pipes, however, when it was discovered that the enamel was leaking into the environment causing health and environmental concerns it was subsequently banned.
Labour laws
Labour laws are regulations that promote the safety of workers and employees.
Labour laws are important to ensure safe work conditions and to provide legal action with punishment towards the employer.
Crown corporations
Crown corporations are completely owned by the federal government and funded through the public but it is operated like a private and independently owned business. They exist to fill the needs of a private business that won't make profit.
Some examples of crown corporations are Canada Post, VIA Rail Canada, CBC, Bank of Canada, and more.
Prevent price fixing
Price fixing is when companies agree to raise their prices to artificially create profit. This protects the consumer as it keeps prices for goods and services affordable.
The act that prevents price fixing is the Competition Act which serves to promote competition and ensure the best prices for consumers.
Drawbacks of government involvement in the economy
Governments have a lot of power and often receive information that is not typically available to the public. It is against the laws for government officials to use private information to gain profit as it is insider-trading.
Some waste and inefficiencies are that government employees are often well paid and have good job security, due to it being publicly funded. This often leads to lazy and inefficient employees compared to private employees that run off of profit ensuring that their employees work harder.