Competition Policy - What do we need to know? (1 Viewer)

[NubMuncher]

Hey guys,

Eco is my next exam; not looking forward to it =/

Just asking what we need to know about competition policy; I know that it is a micro policy to encourage competitive behaviour between firms and hence improve the aggregate supply of an economy which will lead to long term economic growth(right?), but what else do we need to know :S kind of broad lol

Also does this include privatisation and corporatisation or is that seperate?

THANK YOU

 

[NubMuncher]

Also, don't micro policies cost money, which increase gov spending and ultimately drive Demand growth??

 

[rawrence]

National Competition Policy 1995 was a radical microeconomic policy passed in order to boost the productivity in the PRODUCT markets through alleviating trade barriers such as tariffs and quotas. It does this by provoking competition which in turn, increases incentives for firms to become more productive in order to keep up. This will shift the supply curve to the right (You'd probably draw a diagram, but more in the intro as it applies to both FACTOR and PRODUCT markets), which will both raise GDP and lower inflationary pressures (indicated by the drop in price).

Competition Policy however has the costs of increased structural unemployment IN THE SHORT RUN. This is due to firms restructuring to boost productivity, which may require retraining or capital substitution. This is offset by the fact that in the long run, employment should improve.

It does not cost the Government money, unless tariff revenue drops (which occurs when tariff protection is lowered) OR if the Government is required to boost employment caused from Structural factors through Training programs (Vocational education etc.)

Privatisation is more on the FACTOR market I think, I could be wrong.

 

[SXCBEAST]

what that guy said +

national competition policy has established the Australian Competition Consumer Comissions which oversees:

-price collusion
-monopolization
-price discrimination
-exclusive dealing
-market sharing

these measures all help to keep the prices of goods and services low. this increases and stimulates aggregate demand, leading to higher rates of economic growth (give statistic) and in turn, higher standards of living as individuals are given access to a wide variety of cheap goods and services.


privatisation is different, it is about the government selling their telecommunications, financial industries to other independent authorities which will improve ALLOCATIVE and TECHNICAL efficiency.

Thanks btw, this is helping me revise for micro, hate it so much but best of luck