Government
Regulation of
Business
Group 7
Bool, Byron Joseph
Fontillo, Joshua
Leuterio, Aizhel Angela Audrey
Magpantay, Ma. Jamaicah
Torres, Jasmine Christine A.
MARKET
FAILURE
Market failure occurs when the
allocation of goods and resources
is inefficient, leading to negative
outcomes for society, such as
high prices, shortages, or unequal
access to essential services.
MARKET FAILURE
Public Goods
Non-excludable and
non-rivalrous goods
that the market
fails to provide, as
private entities
cannot profit from
them.
Externalities
Unintended effects
of economic
activities on third
parties, either
positive or negative,
not reflected in
market prices.
MARKET FAILURE
Monopoly
A single firm
dominating a market,
leading to price
control, reduced
competition, and
inefficiencies.
Information
Asymmetry
An imbalance in
information between
parties in a
transaction, leading to
poor
decision-making.al
access to essential
services.
MARKET
INTERVENTION
Government intervention refers to the actions
taken by a government to influence or regulate
the economy in order to correct market failures,
promote fairness, and ensure the efficient
allocation of resources.
MARKET INTERVENTION
Providing Public Goods
Ensuring Information
Transparency
Protecting Externalities
Supporting Vulnerable
Groups
MARKET POWER
AND PUBLIC POLICY
MARKET POWER
MARKET POWER
The ability possessed by all
price-setting firms to raise price
without losing sales, which causes the
price-setting firms’ demand to be
down-sloping.
PUBLIC POLICY
PUBLIC POLICY
“a system of laws, regulatory
measures, courses of action, and
funding priorities concerning a given
topic promulgated by a governmental
entity or its representatives”
- Kilpatrick 2000
KEY EFFECTS
KEY EFFECTS
Regulatory Effects
1. Compliance requirements: Firms must adhere to
regulations, such as data protection (GDPR, CCPA) and
advertising standards (FTC guidelines).
2. Industry-specific regulations: Firms in sectors like
healthcare, finance, and tobacco face unique
marketing restrictions.
3. Environmental regulations: Companies must
comply with eco-friendly packaging, labeling, and
advertising guidelines.
KEY EFFECTS
Economic Effects
1. Taxation and subsidies: Tax credits or
subsidies can incentivize firms to invest in specific
marketing strategies (e.g., digital transformation).
2. Trade policies: Tariffs, quotas, and trade
agreements affect international marketing
strategies.
3. Antitrust laws: Regulations prevent
anti-competitive practices, influencing market
structure and firm behavior.
KEY EFFECTS
Consumer Protection Policies
1.
Consumer Act of the Philippines:
Protects consumer rights.
“Republic Act No. 7394, is the main law that
protects consumers in the Philippines. It was
enacted on April 13, 1993 and came into effect
on July 15, 1992.”
KEY EFFECTS
Consumer Protection Policies
2. Data Privacy Act of 2012:
Regulates personal data protection.
“Republic Act 10173, is a law in the
Philippines that protects the privacy of
individuals and their personal data.”
KEY EFFECTS
Consumer Protection Policies
3. Food Safety Act of 2013:
Ensures safe food processing and handling.
“Republic Act No. 10611, is the primary law
that regulates food safety in the Philippines.”
KEY EFFECTS
Consumer Protection Policies
4. Product Standards Law:
Sets quality standards for products.
“Republic Act 4109, also known as the Standards Law,
which was enacted in 1964. This law established the Bureau
of Philippine Standards (BPS) as the National Standards
Body (NSB) of the Philippines. The BPS is responsible for
developing, implementing, and promoting standards for
products in the Philippines.”
KEY EFFECTS
Consumer Protection Policies
5. Consumer Complaints and Inquiries Act:
Establishes complaint mechanisms.
KEY EFFECTS
Environmental Policies
1. Environmental Impact Assessment (EIA) System:
Regulates projects' environmental impact.
2. Clean Air Act: Reduces air pollution.
3. Clean Water Act: Protects water quality.
4. Ecological Solid Waste Management Act: Promotes
sustainable waste management.
5. Renewable Energy Act: Encourages renewable energy
development.
EXTERNALITI
ES
EXTERNALITIES
Whenever an economic agent or party is
involved in some activity, such as
consuming a good or a service, there may
be potential costs and benefits incurred
by other parties which were not present
in a transaction. These are called
externalities
EXTERNALITIES
Externalities are indirect costs or
benefits that a third party incurs.
These costs or benefits arise from
another party's activity such as
consumption.
TYPES OF EXTERNALITIES
NEGATIVE
POSITIVE
However,
If there areif
there
benefits
are costs
that
the
thatthird
the third
party
incurs,
party then
incurs,
it is
thencalled
it is called
a
a positive
negative
externality.
TYPES OF EXTERNALITIES
NEGATIVE
POSITIVE
However,
If there areif
there
benefits
are costs
that
the
thatthird
the third
party
incurs,
party then
incurs,
it is
thencalled
it is called
a
a positive
negative
externality.
NEGATIVE EXTERNALITIES
Externalities can't be measured with
quantitative methods and different
people judge the outcomes of their
social costs and benefits differently.
NEGATIVE EXTERNALITIES
Negative externalities occur when a
transaction has a cost that neither the buyer
nor the seller is forced to pay.
When there is a negative externality, the
competitive output is greater than the
economically efficient output level.
This means that there is a total negative
effect imposed on society from economic
NON-EXCLUDABILITY
“refers to a situation where it is difficult or impossible to
prevent people from using a good or service, even if they
don't pay for it.”
National Defense protects
everyone in the country,
whether they pay taxes or not.
Public Park: anyone can use it,
and no one can be easily
excluded.
IMPERFECT
INFORMATION
IMPERFECT INFORMATION
Imperfect information refers to a situation
where all parties in a transaction do not have
equal or complete information about the
goods, services, or market conditions. This
asymmetry can lead to inefficiencies,
misallocation of resources, and market failure.
CAUSES OF
IMPERFECT
INFORMATION
CAUSES OF IMPERFECT
INFORMATION
Misinformation or
Deception
Asymmetric Information
When incorrect or
misleading
information is
provided, leading to
poor
decision-making.
When one party has
more information
about a good or a
service than another
in an economic
exchange.
CAUSES OF IMPERFECT
INFORMATION
Uncertainty and Risk
Lack of Access to
Information
When future
outcomes are
uncertain, leading
to suboptimal
investments or
consumption
When individuals or
firms cannot obtain
relevant data due to
high search costs or
barriers to access.
CAUSES OF IMPERFECT
INFORMATION
Adverse Selection
Adverse selection occurs
when the better-informed
party uses an asymmetric
balance of information to
take advantage of another
party before an exchange
or agreement has taken
Reduced Consumer
Confidence
When individuals or
firms cannot obtain
relevant data due to
high search costs or
barriers to access.
CAUSES OF IMPERFECT
INFORMATION
Market Power Imbalances
Moral Hazard
Firms with more
information can exploit
consumers, leading to
higher prices or reduced
quality.
Moral hazard occurs after
a deal has been made
between two parties with
asymmetric information
and one party changes
their behaviour as a result.
TO ADDRESS IMPERFECT
INFORMATION
SOLUTIONS TO
ADDRESS
IMPERFECT
INFORMATION
•Government Regulation:
•Implementing laws to ensure
transparency and accountability (e.g.,
truth-in-advertising laws, product labeling
requirements).
•Mandatory Disclosure:
•Requiring firms to disclose relevant
information (e.g., nutritional labels on
food, car history reports).
•
•Third-Party Verification:
•Using independent organizations to
verify claims (e.g., Consumer Reports,
certifications like ISO standards).
SOLUTIONS TO
ADDRESS
IMPERFECT
INFORMATION
•Technology and Information
Systems:
•Leveraging platforms like
review websites and
comparison tools to empower
consumers.
•Education and Awareness:
•Promoting financial and
consumer literacy to help
individuals make informed
decisions.