Public Ownership, Privatisation, Regulation and Deregulation of Markets – AQA Spec

Public Ownership, Privatisation, Regulation and Deregulation of Markets – AQA Spec

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Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

The arguments for and against the Public Ownership of firms and industries

  • Nationalisation – government gain control of an industry and the private sector assets are sold to the public sector
  • E.g the railway network was nationalised in 1945
  • Nationalisation allows for the formation of Natural Monopolies
  • Positive Externalities can be yielded from nationalised industries
  • Nationalised companies usually have the priority of achieving social welfare, in comparison to privatised companies which are mainly profit driven

Arguments for and against privatisation

  • Some argue that privatisation encourages firms to operate efficiently as they are profit driven, thus increasing economic welfare
  • Allocative Efficiency – operating in the free market means that firms also have to produce goods which consumers want and therefore increases the likelihood of it being of better quality
  • Competition may also lead to lower prices
  • Government earn more revenue from a one-off payment when they sell assets to the private sector

Regulation and Deregulation

  • Regulation and laws allow the government to prevent people from consuming particular goods – for e.g making demerit goods illegal or certain merit goods compulsory
  • This allows for a better skilled workforce
  • However, some forms of regulation may incur high costs to implement them
  • Regulation means there are certain rules that firms have to follow otherwise they could face heavy fines – this acts a disincentive to break the rules
  • Deregulation of the public sector allows firms to compete in a competitive market, improving economic efficiency

Regulatory Capture

  • This occurs when regulators start to act in the interest of the company, rather than the consumers’, as a result of impartial information
  • Decisions regarding what price cap should be enforced becomes harder due to asymmetric information


Quick Fire Quiz – Knowledge Check

1. Define ‘Nationalisation’ (2 marks)

2. Identify and explain three arguments for / against the public ownership of firms and industries (6 marks)

3. Identify and explain the arguments for and against privatisation (6 marks)

4. Explain what is meant by the ‘regulation’ and ‘deregulation’ of firms (8 marks)

5. Explain what is meant by ‘Regulatory Capture’ (4 marks)


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