Economics LAP 16

Describe how government is involved in business. Objective

Government’s Original Intentions To protect business propertyTo protect business property  Fire, police, military  Trademarks, copyrights, patents To enforce business contractsTo enforce business contracts To settle business disagreementsTo settle business disagreements © TM

Government’s Original Intentions To set and collect taxesTo set and collect taxes  As well as tariffs:  Extra taxes on imported products  Promote the sale of American-made products

Why Government’s Role Changed Growth and expansionGrowth and expansion  More and different kinds of businesses were created.  Consumers needed things businesses couldn’t provide.

Why Government’s Role Changed IndustrializationIndustrialization  More factories were built.  Factories weren’t always fair to workers or competitors.

Why Government’s Role Changed Attitude changesAttitude changes Environmental concernsEnvironmental concerns  Stopping pollution  Conserving resources

Why Government’s Role Changed Government in businessGovernment in business  Government produces goods and services for consumers.  Example = U.S. Postal Service Changes in technologyChanges in technology

Purposes of Government Involvement To provide public goodsTo provide public goods  Public goods = goods and services that we all use  Cannot be withheld from people who don’t help pay for them

Purposes of Government Involvement To improve public welfareTo improve public welfare  For the benefit of people who are unable to provide for themselves  Examples:  Food stamps  Unemployment compensation

Purposes of Government Involvement To protect public healthTo protect public health  Examples:  Food, drugs, and cosmetics must be tested.  Water supplies must be treated.  Restaurants must undergo inspections.

Purposes of Government Involvement To stabilize the economyTo stabilize the economy  Through monetary policy:  The amount of money that will be in circulation  The level of interest rates  Through fiscal policy:  The level of government spending  The level of taxation

Purposes of Government Involvement To protect specific businessesTo protect specific businesses  Price supports  Subsidies To conserve the environmentTo conserve the environment

Purposes of Government Involvement To protect consumers and investorsTo protect consumers and investors  Examples:  Laws prohibiting false advertising  Laws setting building safety standards  Laws regulating accounting and bookkeeping

Purposes of Government Involvement To protect competitionTo protect competition  By banning monopolies  By regulating natural monopolies

Purposes of Government Involvement To regulate workplace conditionsTo regulate workplace conditions  Examples:  Minimizing hazards to workers  Setting minimum wages

Purposes of Government Involvement To protect business propertyTo protect business property  Examples:  Zoning laws  Copyrights, trademarks, patents © TM

Explain ways in which government regulates business. Objective

How Government Regulates Business Regulatory lawsRegulatory laws  Some prohibit activities.  Some control activities.  Some set requirements. False advertising Harmfulproducts

How Government Regulates Business LicensingLicensing  Issuing a permit for a person or business to function in the marketplace  Example = real estate agent  Government can deny or cancel a license if necessary.

How Government Regulates Business Wage/Price controlsWage/Price controls On August 15, 1971, President Nixon imposed wage and price controls to slow down inflation.  Government sets ceilings on wages and prices.  Used only in times of national crisis

Effects of Regulation Positive:Positive:  Businesses are protected.  Businesses have fair access to resources.  Businesses have clear rules to follow.

Effects of Regulation Negative:Negative:  Expense  Inefficiency

Costs of Regulation Government pays by:Government pays by:  Collecting taxes  Borrowing  From the private sector  By issuing bonds I want your tax money!